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THE PRIMER 



Political Economy: 



IN SIXTEEN DEFINITIONS AND FORTY PEOPOSITIONS. 



IIPRED B. MASON AND JOHN J. LAIOE. 



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CHICAGO: 
JANSEN, MCCLURG & COMPANY. 

1875. 



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Copyright, 1875, 
By JANSEN, McCLURG & CO. 



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PREFACE, 



This little book makes no claim beyond that expressed 
in its title. It is simply a Primer. We have written it 
in the hope that it may be used as a text-book in the 
common schools of the country. The time that can be 
allotted to the study of political economy in these 
schools does not exceed a term or two ; and the ordi- 
nary text-books are far too large to be even superficially 
mastered within that time. The Primer, on the contrary, 
can be thoroughly learned without any undue inter- 
ference with the other studies of the course. The 
experience of one of the authors in teaching political 
economy, for several years, to boys and girls has con- 
vinced us that the arrangement by definitions and propo- 
sitions which we have adopted is the best for the purpose 
here indicated. Especial prominence has been given to 
the more practical applications of the science. The 
pages devoted to cooperation are the result of personal 
study of the subject in England and Germany. While 
the Primer is designed for use as a text-book, we trust 
that persons out of school may read it with some pleas- 
ure and profit. 

The standard English, French, German and American 
works on political economy have been freely consulted in 
the preparation of the book. We have aimed to give, in 
simple words and with copious illustration, the well- 



4 PREFACE. 

settled doctrines of the fascinating' science. The dis- 
tinction between the real and the possible wage-fund has 
not, we believe, been stated before. It may serve to 
reconcile opposing theories on the wage-fund question. 
With this exception, the Primer contains only old truths 
in new forms. A few pages in it are transcripts, more 
or less exact, from articles written by the authors fpr 
the Chicago Tribune. 

The experience in teaching political economy already 
referred to is our excuse for a word of suggestion. The 
scholar should be required to give the definitions and the 
captions of the propositions verbatim^ but mere memoriz- 
ing should not be carried beyond this. It is far better 
that the explanation of the one and the proof of the 
other should be in the pupil's own words. One of the 
best tests of knowledge is to ask for original illustrations. 



Chicago, June, 1875. 



ALFRED B. MASON. 
JOHN J. LALOR. 



TABLE OF CONTENTS. 



Definition i. Political Economy is the science which teaches 
the laws that regulate the production, distribution and 
exchange of wealth, 9 

Definition 2. Wealth is anything for which something can 
be got in exchange, 9 

Definition j. A commodity is wealth in tangible form, . . 10 

Definition 4. Capital is wealth saved, and used in production, 10 

Proposition I. To produce wealth, three things are re- 
quired, — natural agents, capital and labor, 10 

Proposition II. Natural agents which are limited in quan- 
tity, are wealth; and those which are practically unlim- 
ited, are not wealth, 11 

Definition j. Capital is divided into fixed and circulating, , 12 

Proposition III. The proportion of fixed to circulating 
capital depends upon the way in which capital is used, . 13 

Proposition IV. The stock of capital is kept up by con- 
stant reproduction, 14 

Proposition V. The amount of capital used, measures the 
amount of labor employed, 15 

Definition 6. Demand for a thing consists of desire to buy 
it, on the part of persons who have something to give in 
exchange for it 16 

Definition 7. Supply of a thing consists of desire to sell it, 
on the part of persons who possess it, 16 

Proposition VI. Supply in excess of demand causes prices 
to fall ; and demand in excess of supply causes prices to 
rise, 16 

Proposition VII. A demand for a thing tends to produce 
a supply of that thing at a fair price, 17 

(5) 



6 TABLE OF CONTENTS. 

Definition 8. Consumption is productive or unproductive, . i8 
Proposition VIII. Productive qonsumption benefits labor, i8 
Proposition IX. Unproductive consumption hurts labor, . 19 
Proposition X. The division of labor increases its ef- 
ficiency, 2a 

Befinitioji 9. The part of capital which is, or might be, used 
to pay labor is called the wage-fund, 22 

Proposition XI. The possible wage-fund varies with pro- 
duction, 23 

Proposition XII. The real wage-fund varies according to 
the first law of supply and demand, 23 

Proposition XIII. Wages are lower in an agreeable than 
in a disagreeable, in an easily-learned than in a difficult, 
and in a steady than in an unsteady, employment, ... 24. 

Proposition XIV. The average wage of labor is equal to 
the quotient got by dividing the real wage-fund by the 
number of persons employed, 25 

Proposition XV. The test of the highness of wages is their 
purchasing power, 26 

Proposition XVI. Wages can be raised only by increasing 
the real wage-fund or by lessening the number of persons 
employed, 26 

Proposition XVII. The use of labor-saving machinery 
benefits labor, 29 

Proposition XVIII. High wages often make high profits, 31 

Definition 10. A strike is a conspiracy of employees against 
employers, by which the former refuse to work unless the 
latter yield to their wishes, 34 

Definition 11. A lock-out is a conspiracy of employers against 
employees, by which the former refuse to give the latter 
work unless the employees yield to their wishes, ... 34 

Proposition XIX. It is bad policy to strike, 34 

Proposition XX. It is to the advantage of both employers 
and employees to settle their disputes by arbitration, . . 37 

Proposition XXI. The best way to produce wealth is by 
co-operation, 38 

Proposition XXII. Trade-union funds can be best used 
in promoting co-operation, 45 



TABLE OF CONTENTS. 7 

Proposition XXIII. Wealth, when produced, is divided 
into rent, profits and wages, 46 

Proposition XXIV. Wealth is sometimes shared between 
three classes, and sometimes between two, and is some- 
times absorbed by one, 47 

Proposition XXV. The first law of supply and demand 
fixes the proportion of rent, profits and wages to each 
other, 48 

Definition 12. Value is purchasing power, 13 

Defitiition ij. Price is value expressed in money, .... 49 

Proposition XXVI. There cannot be a general rise or fall 
in values, 49 

Proposition XXVII. There may be a general rise or fall 
in prices, 50 

Proposition XXVIII. The value of a thing depends upon 
the cost of its production, 50 

Proposition XXIX. In every fair bargain, both parties 
gain, 51 

Proposition XXX. The first method of exchange, barter, 
is unfit for use in a civilized community, 52 

Proposition XXXI. The great instrument of exchange is 
money, 53 

Proposition XXXII. Money is the measure of values, . 53 

Proposition XXXIII. Money in specie is like all other 
commodities, 54 

Proposition XXXIV. Gold and silver make the best 
money, 55 

Proposition XXXV. Paper money, not convertible into 
specie at par, is an evil, 56 

Proposition XXXVI. The worse currency drives out the 
better, 58 

Proposition XXXVII. Credit is not capital, 59 

Proposition XXXVIII. A commercial crisis is caused by 
the destruction, that is, the unproductive consumption, of 
wealth, 60 

Proposition XXXIX. The effects of a commercial crisis 
can be removed only by the production of wealth, ... 63 



8 TABLE OF CONTENTS. 

Definition 14. A tax is a sum of money collected by a govern- 
ment from persons or property within its dominions, . . 63 

Definition 75. Duties are taxes on imported goods, that is, on 
goods brought from other countries, 63 

Definition 16. A tariff is a law fixing duties, 63 

Proposition XL. A tariff should be for revenue alone, . 64 



The Primer of Political Economy. 



DEFINITION I. Political EconoDiy is the science which 
teaches the laws that regulate the production, distribution 
and exchange of wealth. 

Everything in this world is governed by law. Human laws 
are those made by men. All others are natural laws. A law 
providing for the education of children in schools is a human 
law. The law that children shall keep growing, if they live, 
until they are men or women, and shall then slowly decay and at 
last die, is a natural law. An apple falls from a tree and the 
earth moves around the sun in obedience to natural laws. The 
laws which regulate the production, distribution and exchange 
of wealth are of both kinds. The more important ones, how- 
ever, are natural. 



DEFINITION 2. Wealth is anything for which some- 
thing caft be got in excha?ige. 

Many useful things are not wealth. Air is one of the most 
useful things in the world. A person deprived of it Avould die. 
Water is a very useful thing, too. But air and water are not 
Avealth, because they can be got without giving anything in ex- 
change for them. Sometimes, however, each of them may be 
wealth. If a man had to live in a diving-bell, he would have to 
pay in some way for the air sent down in pipes for him to 
breathe. In a desert, a little bottle of water will sell for a good 
deal. Men sometimes pay for the right to use the water of a 
stream to turn a mill-wheel. In these cases, the air and the 
water ai*e wealth, because something can be got in exchange for 
them. ■ ] 

In order to tell whether or not any particular thing is wealth, 
we must ask, "Can something be got in exchange for it.^" If 
something can, then it is wealth. 

A coat is wealth. So are houses, corn, diamonds, a doctor's 
skill, money, shovels, the ability to make furniture, furniture 
itself, bricks and thousands of other things. 

(9) 



10 PRIMER OF POLITICAL ECONOMT. 



DEFINITION 3. A commodity is wealth in tangible 
form. 

The list just given of things that are wealth contains some 
things that are commodities and some that are not. 

A coat, a house, corn, a diamond, money, a shovel, furniture 
and a brick are commodities, because they are wealth in a form 
which can be touched. 

A doctor's skill and the ability to make furniture cannot be 
touched. Therefore they are not commodities, although they 
are wealth. 

DEFINITION 4. Capital is wealth saved, and used in 
production. 

It is important to remember that capital is wealth that is (i) 
saved, and (2) used in production. Land is wealth, but it is not 
capital, because, although it is used to produce crops, nobody 
has saved it. So $10,000 in money locked up in a safe is wealth, 
but it IS not capital, because, although somebody has saved it, 
it is not used to produce more wealth. 

Food eaten by men who work is capital. Money used to pay 
the wages of workmen is capital. Tools are capital. 

Land is a natui-al agent, like water, air, the force of gravita- 
tion, etc. It is the most important of all the natural agents. 



PROPOSITION 1. 

To produce wealth, three things are required, — natural 
agents, capital, and labor. 

The production of vegetable food needs, first, a natu- 
ral agent in the shape of the land on which the food 
grows; second, the labor of clearing, fencing, plowing, 
digging and planting the land and of gathering the crops, 
and perhaps, as in the case of wheat, the labor of grind- 
ing the grain into flour and of cooking it afterwards; 
and, third, capital in the shape of the tools used in all 
these occupations, the seed employed in planting, the 
clothing and the food consumed by the laborers, etc. 

In the production of a doctor's skill, the principal 
natural agent is again the land. This has produced 



PRIMER OF POLITICAL ECONOMT 11 

most of the food which the body must consume in order 
to exist while the mind gains the required skill. The 
capital is the food and clothing consumed by the doctor 
while studying, the cost of providing him with shelter, 
and the money paid for his tuition. The labor is that 
spent in teaching him and in caring for him from the day 
of his birth. 

In the production of linen, the natural agents directly 
at work are the land on which the manufactory stands 
and on which the raw material (flax) grew and the power 
which makes the machinery go. This power may be the 
air, turning a windmill ; or heat, acting on water in a 
boiler and so creating steam ; or water, turning a water- 
wheel. The labor is that spent in raising the flax and 
that of the men, women and children who spin thread 
from the flax and weave the thread into linen cloth, and 
also that of the persons who built the manufactory and 
invented and made the machinery, and, again, that of the 
persons who now manage the works. The capital con- 
sists of the building, the machinery, the money used in 
paying wages, the flax consumed, etc. 

Thus, in these three very different cases, the produc- 
tion of wealth requires natural agents, capital, and labor. 
No case of production can be imagined in which these 
three forces do not combine. But a law to which no 
exception can be found may be taken as true. 

Therefore, to produce wealth, three things are re- 
quired, — natural agents, capital, and labor, 

PROPOSITION 11. 

Natural agents which are limited in quantity, are wealth ; and 
those which are practically unlimited, are not wealth. 

If anything is unlimited in quantity, anyone who 
wishes it can get it. Air is an example. Everybody 
can get it free, and therefore nobody will give anything 
in exchange for it. But if a person could get control of 
all the air and take it away from everybody else, he 



12 PRIMER OF POLITICAL ECONOMT. 

could get a great deal in exchange for it, because people 
would have to have it or die. Therefore, if air were 
limited in quantity, it would be wealth. 

In thickly-settled countries, land is strictly limited in 
quantity ; none of it is left unowned, and therefore none 
of it can be got free. Every acre of it is wealth. Some- 
thing can be got in exchange for it. In unsettled coun- 
tries, however, land is practically unlimited in quantity. 
That is, there is more of it there than anybody wants. 
A man who owned one of a hundred similar islands near 
the North Pole could not exchange it for anything, be- 
cause anyone who wished an island in that neighborhood 
could get another as good as this for nothing. 

Water is usually practically unlimited in quantity. 
Two cases have been mentioned (see explanation of Def. 
2) in which water is limited in quantity. In both these 
cases, something can be got in exchange for it. There- 
fore, when limited, it is wealth. 

We see, then, that the same natural agent is some- 
times wealth and sometimes not wealth, according as it 
is limited or unlimited in quantity. 

Therefore, natural agents which are limited in quantity 
are wealth, and those which are practically unlimited are 
not wealth. 

DEFINITION 5. Capital is divided ifito fixed and cir- 
culating. 

Capital is used in two ways. It \% fixed in buildnigs, machin- 
ery, tools, the permanent improvements of land (such as di-ain- 
age), canals, railroads, etc. It circulates when used in paying 
wages, buying raAv material (like flax for the manufacture of 
Imen), etc. 

Fixed capital lasts a long time. The things produced by its 
aid use up only a small part of it, year after year. If a manu- 
facturer of linen has a building, machinery, etc., this fixed capi- 
tal can be employed in the manufacture of very many thousand 
yards of linen before it is worn out. Still, the production of 
each yard wears out the works a very little. 

Circulating capital is all used up by being used once. When 
the manufacturer produces a yard of linen, he has entirely parted 



PRIMER OF POLITICAL ECONOMY. 13 



with the flax in it and with the labor spent upon the flax. When 
he sells the piece of cloth, he must get enough for it to replace 
all he has spent for these two things and to paj for the part of 
his fixed capital which has been used up in the manvil'acture, 
and, if possible, to yield him a pi'ofit. 

Thus the product must repay all the circulating capital and 
fart of the fixed capital used in its production. 

A crop of corn, in order to give the farmer a profit, must sell 
for more than the cost of the seed sown and the labor spent in 
preparing the ground and in sowing and gathering the grain, 
flus an amount equal to the harm done to the fencing, drain- 
age, etc. 



PROPOSITION III. 

The proportion of fixed to circulating capital depends upon 
' the way in which capital is used. 

If a shirt-manufacturer hires a number of women to 
sew for him at their homes, his capital is ahnost entirely- 
circulating. He uses nearly all of it in buying cloth, 
thread, buttons, etc., and in paying wages. If he builds 
a large manufactory and stocks it with machinery and 
has his employes work there, a much larger part of his 
capital becomes fixed. 

A very large proportion of the capital of a railway- 
company is fixed in the shape of roadbed, rails, cars, 
locomotives, car-shops and stations. A very small part 
of the capital of a dealer in coal is fixed. He needs only 
a yard in which to store his stock, a few teams and a 
small office. His main use for his capital is in buying 
coal at the mines, defraying the cost of its transportation 
and paying the wages of his employes. 

A similar analysis of any other business would show 
that the capital used in it was divided into fixed and 
circulating, according to the nature of the particular 
industry. 

Therefore, the proportion of fixed to circulating capi- 
tal depends upon the way in which capital is used. 



14 PRIMER OF POLITICAL BCONOMT. 

PROPOSITION IV. 

The stock of capital is kept up by constant reproduction. 

The definition of capital (Def. 4) shows that it must be 
used in order to be capital. Using it destroys it. This 
is true of both circulating and fixed capital. 

When a yard of linen is manufactured, the flax in it, 
as flax, no longer exists. The food consumed by the 
workmen who made it no longer exists. The flax and 
the food are circulating capital. Using them has de- 
stroyed them. 

A building, which is fixed capital, is not used up by 
bemg used once, but it is gradually worn out by use. It 
has to be repaired constantly. If the repairs are neg- 
lected, it finally tumbles down. 

The only difference, in this respect, between fiixed and 
circulating capital is, that the first is destroyed bit by bit 
whenever it is used, while the second is entirely destroyed 
whenever it is used. A spade, which is fixed capital, 
may be used to dig a great many potatoes out of the 
ground, but part of it is worn away each time, A potato, 
which is circulating capital, can be used only once, and 
then it is wholly consumed. 

Now if the yard of linen is not worth more than all 
the capital destroyed in making it, the world's stock of 
capital is less than it would have been had the linen not 
been made. But if the linen is worth more than all the 
capital destroyed in making it, then the capital has been 
more than reproduced, and the world's stock of it has 
been increased. 

As capital must (Def. 4) be used in production, and as 
using it always destroys it, it is evident that the only way 
to keep up the stock of capital is to use it so that it will 
produce, by the time it is destroyed, at least an equal 
amount of capital. 

Therefore, the stock of capital is kept up by constant 
reproduction. 



PRIMER OF POLITICAL ECONOMY. 15 



PROPOSITION V. 

The amount of capital used, measures the amount of labor 
employed. 

To produce wealth (Prop. I), both capital and labor 
are required. Therefore, in order that labor may be 
employed, capital must be. The more capital, the more 
labor. For capital cannot produce wealth, unless labor 
works with it. 

The reason why capital measures labor, instead of 
labor's measuring capital, is, that the capitalist takes the 
first step in production by providing buildings, machin- 
ery, tools, and usually raw materials. Then, but not till 
then, labor takes up the task. Capital must act first, and 
labor second. Until capital acts, labor cannot. There- 
fore, labor has to wait for capital to begin, and is de- 
pendent upon capital for employment. 

Labor also depends upon capital for support while be- 
ing employed. The capitalist advances to the laborer, 
in the shape of wages, the food, clothing, shelter, etc., 
needed by the latter, and finally repays himself for the 
advance out of the proceeds of the wealth the laborer 
has helped to produce. A manufacturer of jewelry, for 
instance, first uses his capital in providing a suitable 
work-room and the necessary tools. Then he buys the 
need-ed gold, and the other raw materials. Then he 
hires labor. The amount of labor he engages must de- 
pend upon the size of his work-room, the number of his 
tools, and the quantity of gold, etc., which he has to be 
made into ornaments. These things all depend upon the 
amount of capital he has invested. Moreover, before 
he can sell anything, it must be nianufactured. While 
it is being manufactured he must pay out money to his 
workmen without getting any money from his customers. 
In order to do this, he must have capital. 

Therefore, since labor is employed by capital, and 
supported by capital, the amount of capital used meas- 
ures the amount of labor employed. 



16 PRIMER OF POLITICAL ECONOMT. 



DEFINITION 6. Demand for a thing consists of a 
desire to buy it, on the part of persons who have sotne^ 
thing to give in exchange for it. 

DEFINITION 7. Supply of a thing consists of a desire 
to sell it, on the part of persons 7vho possess it. 

Thus a demand for cotton consists of the desire to biij cotton 
in the minds of persons who liave money or something else to 
give in exchange for the cotton. If they have no money and no 
purchasing power in any other form, however much they may 
want cotton, there is no demand for it in tlie politico-economical 
meaning of the word. 

So a supply of cotton consists of a desire to sell cotton, in the 
minds of persons who have cotton to give in exchange formoney 
or any other commodity. 



PROPOSITION VI. 

Supply in excess of demand causes prices to fall, and 
demand in excess of supply causes prices to rise. 

When the supply of anything exceeds the demand for 
it, each person who wishes to sell the particular 'thing 
will be afraid that his stock of it will be the portion of 
the supply which the demand will not reach. He will, 
therefore, put down his prices in order to induce buyers 
to take his wares instead of those of his neighbor. Each 
seller will do this, consequently general prices will fall. 
If there is a demand for nine brooms, and a supply of 
ten, each broom-seller will fear that one of his brooms 
will be left on his hands. To prevent this, he will mark 
down his prices; therefore, brooms will be cheaper. 
Hence, greater production and greater cheapness go 
hand in hand. 

When demand for anything exceeds supply of it, each 
person who wishes to buy the particular thing will be 
afraid that the whole supply of it will be absorbed by 
other buyers, and that he will not be able to get what he 
wants. He will therefore offer more in exchange for it, 



PRIMER OF POLITICAL ECONOMY. 17 

in order to induce the owner to sell to him instead of to 
his neighbor. Each buyer will do this; consequently, 
general prices will rise. If five persons want horses, and 
there are only four horses for sale, each of the five will be 
willing to pay something extra rather than not have any 
horse at all. The four highest bidders will get the four 
horses ; therefore, horses will be dearer. Hence, scanty 
production means dear goods. 

This demonstration proves the " first law of demand 
and supply," — namely, supply in excess of demand 
causes prices to fall, and demand in excess of supply 
causes prices to rise. 

PROPOSITION VII. 

A demand for a thing tends to produce a supply of that 
thing at a fair price. 

» 
If there is a demand for anything, it will pay capital- 
ists to use their capital in supplying that thing; they 
will therefore do so. If the profits they make are very 
large, other capitalists will be tempted to go into the 
business. Then competition between the manufacturers 
(Prop. VI) will cut down the price of the article. It 
will not, however, cut it down, except temporarily, below 
a fair price, that is, a price which will pay for the natural 
agents, capital and labor expended upon its production. 
For if the price falls below this limit, capital will be 
withdrawn from the industry. This will diminish the 
production. The resulting scarcity of the thing (Prop. 
VI) will raise its price again. 

In 1S69 there was a sort of mania for velocipedes. 
Many boys and some men wanted them. This created 
a demand for velocipedes. The demand was at first in 
excess of the supply; prices were therefore high. A 
great supply of velocipedes followed ; then their prices 
fell. Pretty soon it was discovered that there was not 
much amusement after all in riding on a velocipede. 
The demand for them became almost nothing ; their man- 



18 PRIMER OF POLITICAL ECONOMY. 

ufacture stopped almost entirely. But there was a great 
stock of them on hand ; they were therefore sold for very 
small prices. Now there is a little demand for velocipedes 
for children, and these can be bought at a fair price. 

In the case of things, — such as the paintings of a dead 
artist, — which are strictly limited in quantity, demand 
cannot produce a supply at a fair price, because the ne- 
cessary supply cannot be produced, no matter how much 
capital and labor are spent in the effort. But in the case of 
all things which can be produced in any quantity — that is, 
in the case of nearly everything — this proposition applies. 

Hence, we have the " second law of supply and de- 
mand," — namely, a demand for a thing tends to produce 
a supply of that thing at a fair price. 

DEFINITION 8. Consumption is productive or unpro- 
ductive. 

Consumption which increases the productive powers of the 
community is productive." Needed food eaten by a man who 
works is productively consumed. The iron which is melted and 
then made into a rail which is afterwards used, is productively 
consumed. So are the tiles used in draining a farm. 

Consumption which does not increase the productive powers 
of the community is unproductive. The food and clothing of an 
idler are unproductively consumed. If a workingman, who 
needs only a pound of food a day, eats a pound and a half, the . 
extra half-pound is unproductively consumed. Iron melted and 
flung away is unproductively consumed. Silks, velvets and 
laces are usually unproductively consumed. So is tobacco. 

PROPOSITION VIII. 

Proxiuctive consumption benefits labor. 

Productive consumption (see explanation of Def. 8) 
increases the productive powers of the community. In- 
creasing the productive powers of a community increases 
, its stock of wealth. The larger this is, the greater is apt 
to be the capital of the community. And if more capi- 
tal is used, more labor (Prop. V) is employed. Hence 



PRIMER OF POLITICAL ECONOMT. 19 

productive consumption causes a greater employment of 
labor. 

Therefore productive consumption benefits labor. 

PROPOSITION IX. 

Unproductive consumption hurts labor. 

When anything is consumed without increasing the 
productive powers of a community, that community's 
stock of wealth is decreased by just the value of the 
thing thus consumed. If one thousand people each eat 
one-fourth of a pound more food per day than they need, 
the community's stock of wealth suffers a needless loss 
of two hundred and fifty pounds of food a day. 

Unproductive consumption decreases a community's 
stock of wealth. If a country's wealth is lessened, the 
country's capital is apt to be less. But the less capital 
(Prop. V), the less labor. 

Suppose a man pays $250 a year for food, one-fifth of 
which he does not need, and therefore consumes unpro- 
ductively. If he stops this unproductive consumption, 
the capital and labor employed in producing the $50 
worth of food now wasted will be used in producing 
something else for which there is a demand, say shoes. 
The man will have the $50 he saves every year to use in 
producing a third thing, say books. Then the com- 
munity will still have all the food it needs, and will have 
besides, as the result of this stoppage of unproductive 
consumption, more shoes and more books, of neither of 
which did it have enough before. 

In this case, the price of food remains the same, be- 
cause the demand has diminished with the supply. The 
prices of both shoes and books are lower, because (Prop. 
VI) the supply has increased. 

There was only one fund used in production, that is, 
in hiring labor. This was the fund used to produce the 
€xtra food. This fund still exists, and is used to produce 
shoes. But now there is another fund, which is used to 



20 PRIMER OF POLITICAL BCONOMT. 

produce books. There are, therefore, since the unpro- 
ductive consumption ceased, two funds used in hiring 
labor where there was only one before. So the stop- 
page of unproductive consumption has benefited labor. 
Therefore, unproductive consumption hurts labor. 

PROPOSITION X. 

The division of labor increases its efficiency. 

It would be a waste of labor and time for the farmer, 
after having harvested his wheat, to carry it to the mill, 
grind it himself into flour, take the flour to the city, then 
bake it into bread, and then carry the loaf around in 
search of a buyer for it. The farmer knows how to farm 
and has the needed tools. He does not know how to 
run a mill, or a railroad, or a bakery, and he has none of 
the necessary machinery. His labor can therefore be 
best used on the farm. If he can earn $5 by working 
five days, one as a farmer, one as a miller, one as a car- 
rier, one as a baker, and one as a peddler, his labor dur- 
ing the same five days on the farm would probably be 
worth two or three times that sum. Moreover, if he con- 
fines himself to farming, he has to buy only one set of 
tools and can keep them almost constantly in use, so that 
his capital does not lie idle. If he pursued five trades, 
he would have to have five different sets of tools, and 
four sets would have to lie idle all the while. Therefore, 
both capital and labor can be best employed where labor 
is divided. . 

This is true also within the limits of one trade. Adam 
Smith, the first great politico-economist, gives the follow- 
ing illustration of the efficiency produced by the division 
of labor : " The business of making a pin is divided into 
about eighteen distinct operations. One man draws out 
the wire, another straights it, a third cuts it, a fourth 
points it, a fifth grinds it at the top for receiving the 
head; to make the head requires two or three distinct 
operations ; to put it on is a peculiar business ; to whiten 



PRIMER OF POLITICAL ECONOMT. 21 

the pins is another; it is even a trade by itself to put 
them into the paper. I have seen a small manufactory 
where ten men only were employed, and where some of 
them consequently performed two or three distinct op- 
erations. But though they were very poor, and therefore 
but indifferently accommodated with the necessary ma- 
chinery, they could, when they exerted themselves, make 
among them about twelve pounds of pins in a day. 
There are in a pound upwards of four thousand "pins of 
a middling size. Those ten persons, therefore, could 
make among them upwards of forty-eight thousand pins 
in a day. Each person, therefore, making a tenth part of 
forty-eight thousand pins, might be considered as making 
four thousand eight hundred pins in a day. But if they 
had all wrought separately and independently, and 
without any of them being educated to this peculiar 
business, they certainly could not each of them have 
made twenty, perhaps not one, pin in a day." 

There are five reasons why the division of labor in- 
creases its efficiency. 

First, the individual workman acquires more dexterity 
by doing the same thing many times than by doirwg many 
things a few times. A man will be a better blacksmith 
if he works at that trade every day than if he gives half 
the week to blacksmithing and half to some other trade ; 

Second, the time lost by passing from one employ- 
ment to another is saved by the division of labor. In 
pin-making, if the man who straightened the wire cut it 
afterwards, he would have to drop one set of tools and 
take up another. He might have to move from one part 
of the shop to another. The time spent in doing so 
would amount to some days in the course of a year ; 

Third, it is unnecessary, when labor is properly divided, 
to buy tools that are used only part of the time. In the 
case just given, the tools used in straightening the wire 
would lie idle while the wire was being cut, and vice versa. 
But when two men have charge of these two processes, 
both sets of tools are used all the while ; 



22 PRIMER OF POLITICAL ECONOMT, 

Fourth, when labor is divided, the light parts can be 
given to weak persons, such as women and children, and 
the heavy parts to strong men. Thus each employe 
can be given the w^ork best suited to his or her powers ; 

Fifth, when a workman does one thing constantly, he 
is more apt to invent some new and better method of 
doing it than he would be were his attention divided 
among a number of processes. 

Labor can be advantageously divided to any extent, 
as long as each employe has all his time occupied. 

There are two disadvantages to the individual laborer 
in the division of labor. First, his work is more mo- 
notonous, and therefore may be less pleasant. Second, 
he can do only one small thing well, and therefore has. 
more difficulty in finding work when out of employment. 

These disadvantages, however, decrease the efficiency 
of labor very little. The advantages far outweigh them. 

Therefore, the division of labor increases its efficiency. 



DEFINITION 9. The part of capital which is, or might 
be, used to pay labor is called the wage-fund. 

The part which is so used is the real wage fund. The part 
that might be so used, that is, the part which capitalists could 
afford to give in exchange for labor, is the possible wage-fund.. 
The distinction is important. 

A manufacturer may pay $100,000 a year in wages, and make 
a profit of $25,000 for himself. Rather than have his capital lie 
idle, he would probably be willing to pay $110,000 in wages, and 
clear only $15,000. In this case the real wage-fund is $100,000, 
and the possible wage-fund is one-tenth more, or $110,000. 

The real wage-fund can never exceed the possible one, but it 
may fall below it. Workmen, through ignorance or lack of 
combined eftbrt, may receive less than their employers could 
afford to pay. 



PRIMER OF POLITICAL ECONOMT. 23 

PROPOSITION XI. 

The possible wage-fund varies with production. 

If production increases, the possible wage-fund in- 
creases, and vice versa. 

The wage-fund can never exceed the sum which the 
capitalist is willing to give in exchange for labor, because 
he will cease to use his capital rather than expend more 
than this in wages. But since the wages paid by the 
capitalist are repaid him by the sale of the product, the 
more valuable the product is, the more he will be willing 
to give in exchange for labor. 

Therefore, as the product increases in value, the greater 
will be the possible wage-fund. And as the product de- 
creases in value, the less will be the possible wage-fund. 

Suppose a knife-manufacturer pays %\ for labor which 
produces, in a day, two knives worth %\ a piece. If the 
workman labors with greater energy or care and so pro- 
duces $2.50 worth of knives everyday, the manufacturer 
will be willing to pay a higher price for his labor, because 
it will be worth more than it was before. But if the 
workman becomes lazy or careless and produces only 
$1.50 worth of knives every day, the manufacturer can- 
not afford to pay him as high wages as he did before, 
and will therefore cut down his wages. 

Therefore, the possible wage-fund varies with pro- 
duction. 

PROPOSITION XII. 

The real wage-fund varies according to the first law of 
demand and supply. 

Wages are the price paid for labor. We have seen 
(Prop. VI) that prices depend upon the ratio of demand 
and supply. If demand exceeds supply, prices rise. If 
supply exceeds demand, prices fall. At any given time, 
there is a demand for labor, represented by the capital 



24 PRIMER OF POLITICAL ECONOMT. 

seeking investment, and a supply of labor, represented 
by the men, women and children seeking employment. 
The ratio between the two fixes (Prop. VI) the rate of 
wages. 

For if the capital seeking investment is small, and the 
number of people offering their labor is large, the latter 
will compete with each other for employment and will be 
willing to work for very little rather than get nothing to 
do. Therefore, wages will be low. If the capital seek- 
ing investment is large, and the number of possible 
laborers small, the capitalists will compete with each 
other for the chance of employing labor, and will be 
willing to give high wages rather than have their capital 
lie idle. The-refore, wages will rise. 

The reason that wages increase with the skill, morality 
and trustworthiness of the individual laborer is that the 
demand for such labor is in excess of the supply. 

When the Grand Trunk railway was being built in 
Canada, English masons were sent to that country. 
They had earned ^s. a day in England. For doing the 
same work in Canada, they got 7^. 6d. a day. It cost 
them no more to live in one country than in the other. 
The Canada wages were therefore i ^ times as high as 
the English wages. The reason of the difference was 
that there was a greater demand for masons, in propor- 
tion to the supply of masons, in Canada than in England. 

Therefore, the real wage-fund varies according to the 
first law of supply and demand. 

PROPOSITION XIII. 

Wages are lower in an agreeable than in a disagreeable, 
in an easily-learned than in a difficult, and in a steady 
than in an unsteady, employment. 

For persons, in choosing their trades and professions, 
are apt to take the most agreeable employment, the one 
that seems to them easiest to learn, and the one which 
apparently offers them the most constant work. The 



PRIMER OF POLITICAL ECONOMY. 25 

result is that the supply of labor in the employments that 
are disagreeable, hard to learn, and uncertain, is much 
less than the supply of labor in more favored industries. 
It is therefore more apt to be insufficient to meet the de- 
mand. Consequently (Prop. XII) its wages are apt to 
be higher. 

Scavengers get high wages because their work is very 
disagreeable ; engravers get them because their work is 
hard to learn; and plumbers get them because their 
work is very uncertain, now brisk and now dull. 

Therefore, wages are lower in an agreeable than in a 
disagreeable, in an easily-learned than in a difficult, and 
in a steady than in an unsteady, employment. 

PROPOSITION XIV. 

The average wage of labor is equal to the quotient got by 
dividing the real wage-fund by the number of persons 
employed. 

If the daily wage-fund of an employer is $ioo, and he 
hires fifty men, it is evident that he must pay them an 
average wage of $2, which is the quotient of the wage- 
fund ($100) divided by the number of men employed 
(50). This will be equally true if the wage-fund is 
that of a country instead of one man, is yearly instead of 
daily, and is counted by millions instead of tens of dol- 
lars, and if the laborers are many thousands instead of 
few in number. Since the real wage-fund (Def. 9) is the 
money actually paid to laborers, the part of it paid to 
each laborer, on an average^ must be equal to the whole 
divided by the number of wage-getters. 

Therefore, the average wage of labor is equal to the 
quotient got by dividing the real wage-fund by the num- 
ber of persons employed. 



26 PRIMER OF POLITICAL ECONOMY. 



PROPOSITION XV. 

The test of the highness of wages is their purchasing 
power. 

If the wages of A will buy more than the wages of B 
will, A's wages are higher than those of B, although 
they may not contain as many dollars and cents. Thus, 
if A, in New York, gets $3 a day, and B, in California, 
is paid $4 a day, and if clothing, food, rent, etc., are 
twice as dear in California as in New York, $3 in New 
York will buy as much as $6 in California, and therefore 
A can earn as many necessary things in a day as B can 
in one and a-half days. Hence A's wages are higher 
than B's, although he gets $1 less a day. 

Suppose John Smith, an English carpenter, earns four 
shillings (fi) a day, and John Brown, an American, 
earns %2 a day. Suppose, too, that a suit of clothes 
costs $6 in England and $15 in America. Then Smith's 
wages, reckoned in clothes, are larger than Brown's ; for 
Smith can earn a suit in six days, while Brown has to 
work seven and a-half days in order to earn it. If other 
necessaries are as cheap in England as clothes are, 
then Smith's wages, reckoned in anything except money, 
are larger than Brown's. 

To compare wages, then, we must first find out how 
much money each laborer gets, and then how much that 
amount of money will buy. The man who can buy the 
most has really the highest wages, no matter how low 
they may be in dollars and cents. 

Therefore, the test of the highness of wages is their 
purchasing power. 

PROPOSITION XVI. 

Wages can be raised only by increasing the real wage-fund 
or by lessening the number of persons employed. 

This is evident, because (Prop. XIV) wages are the 
quotient of the real wage-fund divided by the number 



PRIMER OF POLITICAL ECONOMT. 27 

of men employed, and the quotient can be increased 
only by increasing the dividend, or by diminishing the 
divisor. 

In this case, the dividend may be increased in four 
ways: 

First, when the real wage-fund (see explanation of 
Def. 9) is the same as the possible wage-fund, an in- 
crease in production may be caused by increased energy 
on the part of the laborers. This (Prop. XI) will in- 
crease the possible wage-fund. The laborers can then 
persuade, or perhaps by united action compel, the em- 
ployer to advance the real wage-fund as far as the possi- 
ble wage-fund has advanced. Suppose a farmer can 
afford to use four-tenths of his annual crop in paying his 
laborers, and does so. If the crop is worth $100, the 
laborers will get $40. If the crop rises in value to $200, 
the possible wage-fund will be f 80. The laborers may 
be able to persuade the farmer to give them the benefit 
of this advance. If not, they can compel him to do so 
by refusing to work except for the increased pay ; pro- 
vided, Xhsit he can get nobody else to take their places. 
This latter remedy for low wages is, however, a danger- 
ous one for the laborers, as Prop. XIX will show. 

Second, when the real wage -fund is below the possi- 
ble wage-fund, persuasion or compulsion may make it 
the same. 

Third, both the real and the possible wage-funds are 
increased (Prop. XV) whenever the commodities bought 
by the laboring classes are cheapened. 

Fourth, if a laborer, or anybody else, avoids unpro- 
ductive consumption and saves what he can, he increases 
the wealth of the country, therefore the capital, and 
therefore the wage-fund. It is calculated that every 
$1,000 in the savings-banks, by being loaned to a man 
who wishes to use it as capital, can employ one extra 
laborer. 

It is far better to increase the dividend (the real wage- 



28 PRIMER OF POLITICAL ECONOMT. 

fund) than to diminish the divisor (the number of men 
employed). 

A decrease in this divisor will not always increase the 
quotient, because it is apt to cause a decrease in the 
dividend. If a wage-fund of %\o is divided among five 
men, and the death or idleness of one man involves a de- 
crease of %2 in the wage -fund, wages will remain the 
same. At first, five men got $io, or %2 apiece, now four 
men get $8, or %2 apiece. There are two ways in which 
a decrease in the number of men employed may not in- 
crease the wages of the remainder : 

First, since capital cannot produce anything (Prop. 
I) except with the aid of labor, a diminution of the lat- 
ter may make the stock of capital too large to be profit- 
ably used in connection with the labor that is left. Part 
of it will, therefore, be withdrawn. This will diminish 
the general wage-fund. This decrease in the dividend 
may be large enough to balance, or more than balance, 
the decrease in the divisor. If it just balances it, wages 
will remain the same, as the last example shows. If it 
more than balances it, wages will fall. Thus if the with- 
drawal of one of the five men leads to the reduction of 
the wage-fund to ^7, the four who are left will get only 
$1.75, instead of $2, apiece. Moreover, the diminished 
production of one commodity, which is apt to result from 
the withdrawal of labor, will raise its price, and thus 
(Prop. XV) really decrease the wages of all buyers of 
that commodity; 

Second, if the men thrown out of work find nothing 
else to do, they will be unproductive consumers. They 
will then be supported at the expense of the whole coun- 
try, including, of course, all wage-getters. This will di- 
minish the wealth of the country. A decrease in wealth 
usually involves a decrease in capital, and a decrease in 
capital means a smaller wage-fund. In this case too, 
then, a smaller divisor will involve a smaller dividend, 
and therefore the quotient may not be greater. 

Lessening the number of men employed is thus at 
best only a temporary remedy for low wages. By de- 



PRIMER OF POLITICAL ECONOMT, 29 

creasing the supply, and thus (Prop. VI) raising the price 
of the commodity on which less labor is now spent, it 
diminishes the wages of all buyers of that commodity. 
By causing a direct withdrawal of capital, it diminishes 
the wage-fund. By increasing the unproductive con- 
sumption of the country, it lessens its wealth and there- 
fore its wage-fund. 

Nevertheless, this decrease in the number of employees 
may raise wages. If half the carpenters in this country 
should die or emigrate, the wages of the other half would 
be advanced, although, owing to the consequent with- 
drawal of some capital, the new wages probably would 
not be double the old ones. 

Therefore, wages can be raised only by increasing the 
real wage-fund, or by lessening the number of persons 
employed. 

PROPOSITION XVII. 

The use of labor-saving machinery benefits labor. 

The use of such machinery may at first diminish tne 
number of laborers employed, but it will ultimately 
increase the number. If a spinning-machine which 
enables two men to do the work of ten is invented, its 
use would probably lead, at first, to the discharge of 
some of the spinners then employed. The saving in 
labor would make spun goods cheaper. This would 
(Prop. XV) really raise the wages of all laborers who 
used such goods. Moreover, the manufacture of the 
new machines would lead to the employment of more 
machinists. 

The gain, too, would be lasting, while the loss would 
be only temporary. Experience has shown that an arti- 
cle offered at a low price will be bought by many per- 
sons who would prefer to get along without it if the price 
asked were a little higher. If a manufacturer can pro- 
duce linen at a cost of 95 cents a yard, and can sell one 
thousand yards if he asks $1.05 a yard, and three thou- 
sand yards if he asks only ^i, it will pay him to choose 



30 



PRIMER OF POLITICAL ECONOMY. 



the latter price, because he will then make a larger sum 
of money. His two accounts would be as follows : 

i,ooo yards sold at $1.05 $1,050 

Cost of same at 95 cents 950 

Total profit $ 100 

3,000 yards sold at $1 $3,ooo 

Cost of same at 95 cents 2,850 

Total profit $ 150 

The extra profit at the lower price is $50. 

The great reduction in the cost of production, and 
therefore in the selling-price of goods made by machin- 
ery, has always hitherto so increased the demand for the 
goods that the manufacturers have ere long employed at 
least as many workpeople, with the machinery, as they 
did before the machinery was invented. Usually they 
have employed many more. Thus, to take the case of 
linen, the persons now employed in its manufacture 
greatly outnumber those so employed when the work 
was nearly all done by hand. 

The following little table, condensed from Mr. Thomas 
Brassey's "Work and Wages," p. 125, shows that in 
England, Scotland and Ireland the number of persons 
employed in the manufacture of several important com- 
modities has increased with the increase of the number 
of labor-saving machines, and decreased with the de- 
crease in such machinery: 



Cotton , 



j Number of power-looms 
( Number of employees . . 

Woolen, etc. \ ^""^^^^ ""^ power-looms 
' \ Number of employees . . 



Flax, etc. .. 



Number of power-looms 
Number of employees . . 



1856. 

298,847 
379,213 

53,399 
166,885 

8,689 
80,262 



399,992 
451,569 

64,818 
173,046 

15,347 
94,003 



1868. 



379,329 
401,064 

118,865 
253,056 

35,047 
135,333 



PRIMER OF POLITICAL ECONOMT. 31 

The temporary loss of employment by the people 
whose labor is done by machinery is more than counter- 
balanced by the permanent gain of the people whose 
labor is necessary to make the machines and by the 
finally increased demand for the labor temporarily in- 
jured. Besides this, the increased cheapness of the 
machine-made goods (Prop. XV) raises the wages of 
every laborer who buys them. This is a permanent gain 
in most cases for all laborers. 

Therefore, the use of labor-saving machinery benefits 
labor. 

PROPOSITION XVIII. 

High v^ages often make high profits. 

The cost of labor "is determined by the amount of 
work really done for the wages."* Thus, if A and B are 
paid equal wages, and A does twice as much work as B, 
B's labor is twice as dear as A's. Suppose they get $2 
apiece. B produces 10 yards of linen in a day and A 
produces 20 yards. Each yard produced by B therefore 
costs 20 cents for labor, while each produced by A costs 
only 10 cents for labor. It will be cheaper for the em- 
ployer to hire A at $3 a day than to continue to employ 
B at $2. For then linen will still cost ($3-^ 20=) only 15 
cents a yard for labor, whereas with B at $2 it will cost 
20 cents a yard for labor. Good labor at good wages 
may therefore be cheaper than poor labor at poor wages. 

If an employer gives higher wages than his neighbors, 
he will attract to his service the very best laborers. He 
will therefore have the advantage of a set of workmen 
who have more strength, skill, carefulness, economy in 
the use of materials, honesty, and sobriety, than those of 
his neighbors. His employees will be careful not to lose 
their good places by quarreling with him in any way. 
The feeling that he is treating them generously will lead 
them to treat him in the same way. They will not shirk 
work, and thus part of the expense of overseers may be 

* Prof. Fawcett. 



32 PRIMER OF POLITICAL ECONOMY. 

saved. The cheerfulness and hopefulness caused by 
their improved material condition will increase their pro- 
ductive powers. In Austria free hired labor was found 
to be three times as productive as the labor of serfs. 
The better food which men getting higher wages can buy 
may also increase their powers of production. 

Thus high wages tend to increase production. They 
often, as experience has shown, increase it so largely 
that the real cost of production is less, and the profits are 
therefore higher. 

The following proofs of this are taken from Mr. 
Thomas Brassey's " Work and Wages ": 

"At the commencement of the construction of the 
North Devon [Eng.] railway, the wages of the laborers 
were 25. a day. During the progress of the work their 
wages were raised to 2s. 6d. and 3J. a day. Nevertheless, 
it was found that the work was executed more cheaply 
when the men were earning the higher rate of wages than 
when they were paid at the lower rate. 

" In London, in carrying out part of the Metropolitan 
Drainage works, it was found that the brickwork was 
constructed at a cheaper rate per cubic yard after the 
wages of the workmen had been raised to 10^., than 
when they were paid at the rate of 6s. a day. 

"In the same quarry at Bonnieres [France], in which 
Frenchmen, Irishmen and Englishmen were employed 
side by side, the Frenchmen received 3 francs, the Irish- 
men 4, and the Englishmen 6 francs a day. At those 
different rates, the Englishman was found to be the most 
advantageous workman of the three. 

" During the construction of the refreshment-room at 
Basingsbroke [Eng.], on one side of the station a Lon- 
don bricklayer was employed at 5 j. 6d. a day, and on the 
other two country bricklayers at 3^. 6d. apiece a day. It 
was found, by measuring the work performed, without 
the knowledge of the men employed, that the one Lon- 
don bricklayer laid, without undue exertion, more bricks 
in a day than his two less skilful country fellow-laborers. 



PRIMER OF POLITICAL ECONOMY. 33 

" On the Grand Trunk railway, a Humber of French 
Canadian laborers were employed. Their wages were 
y. 6d. a day, while the Englishmen received from 55. to 
6s. a day ; but it was found that the English did the 
greatest amount of w^ork for the money." 

If high wages incite men to better work, a smaller 
number of men can be employed to produce a given 
amount. In this way, while the wages of the individual 
are higher, the aggregate wages (the real wage-fund) may 
be less. If 10 men, getting $3 a day, will do the work 
of 16 men, who get $2 a day, it is manifestly cheaper for 
the employer to hire the 10 men. For then he will pay 
only $30 a day in wages instead of ^32, and will still 
have the same product. 

The French smelting-works employ 42 men to do the 
work done by 25 men in English works of the same sort. 
If the Frenchmen get $1 a day, and the Englishmen 
^1.50, the real cost of labor is greater in France than in 
England ; for the 42 men will be paid f 42 a day, and 
the 25 men $37.50 a day. Both sets do the same work. 
Therefore the labor on this work costs $4.50 less in Eng- 
land than in France. 

It must be remembered that increased wages can only 
make increased profits by increasing production. Hence, 
if men are not induced to work better by getting better 
wages, it is bad policy for the employer to give such 
wages. There are cases in which high wages will not 
stimulate production. When the laborer can buy all he 
needs with low wages, if wages rise, he will labor just 
long enough to earn what he used to earn in a day, and 
will idle away the rest of his time. The Hindoos em- 
ployed in railway-building in India worked less and less 
as their wages rose. The coal-miners in England have 
had their wages greatly increased since 1870, but their 
hours of work have since been fewer, so that the value 
of the coal produced has not kept pace with the in- 
creased value of the wages. Their high wages have 
3 



34 PRIMER OF POLITICAL ECONOMT. 

therefore diminished, not increased, profits. These 
cases show that high wages do not always make high 
profits. The previous proof, however, has shown that 
they sometimes do, and in fact are apt to do so. 
Therefore, high wages often make high profits. 

DEFINITION lo. A strike is a conspiracy of employees 
against ertiployers^ by which the former refuse to work 
unless the latter yield to their wishe 

DEFINITION II. A lock-out is a conspiracy of employers 
against employees^ by which the foriner refuse to give the 
latter work unless the employees yield to their wishes, 

PROPOSITION XIX. 
It is bad policy to strike. 

When men strike, the side which can afford to be idle 
the longest will win. The masters are usually rich 
enough to live on their accumulated property for some 
time. The men often have no savings, and rarely, if 
ever, have large ones. They may belong to a trade- 
union which will supply them with means of subsistence 
for some time, but the small funds of such a society, di- 
vided among a number of men, cannot go far. The 
masters must have the men work in order to have their 
capital yield them anything, but the men must work in 
order to live. It is plain that the masters can, as a rule, 
stay idle the longest. 

The masters can combine against the men. Since a 
strike which forced one employer to raise wages would 
probably compel all similar employers in that part of 
the country to increase their wage-funds, too, it is to the 
apparent interest of every employer that no strike should 
succeed. Hence, if one set of employees is supported 
while on strike by the contributions of their comrades 
who are still at work, the employers of the latter often 



PRIMER OF POLITICAL ECONOMT. 35 

make a lock-out (Def. ii), and so cut off this source of 
supply and starve all the men together into submission. 

The masters can combine with more effect than the 
men, because they are fewer and better informed. 

It grows more difficult to strike successfully, every 
year, because the increased facilities of transportation 
enable the employers to bring men from other parts of 
the country, and even from other countries, to take the 
place of the strikers. Men have been engaged in 
Sweden and brought to this country to take the place of 
Americans who were on strike, 

A strike is apt to create a habit of idleness among the 
strikers, which unfits them for good work thereafter. 
They are often led to drink in order to while away the 
time. The want from which they and their families suffer 
while they earn nothing, sometimes drives them to theft. 
If these dangers are escaped, a strike usually consumes 
all the men's savings, and obliges them to waste, in un- 
productive consumption, a large part, if not all, of the 
trade-union's funds, which are the joint savings of them- 
selves and their fellows. The strike of the Preston 
(England) spinners, in 1836, cost, the men $300,000 and 
the masters over $200,000. The strike of 17,000 Preston 
spinners for thirty-six weeks, in 1853, cost the mas- 
ters $825,000 and the men $2,100,000. The strike of 
the Belfast (Ireland) weavers in 1874 cost the strikers 
$1,000,000. 

The fear of constant trouble from strikes is apt to 
drive away capital, and thus make it necessary for the 
men dependent upon the wage-fund part of that capital 
to seek employment elsewhere, A prolonged strike has 
sometimes utterly ruined the industries of a whole town. 
The prosperity of Norwich, England, ended with a great 
strike there in 1830, 

Much of the Russian trade has been lost to English 
manufacturers, because the Russian merchants, hearing 
of strikes in England, and fearing their orders could not 
be executed there, have sent the orders elsewhere. 



36 PRIMER OF POLITICAL BCONOMT. 

If, however, all these obstacles are overcome and the 
strike succeeds, it very seldom repays the men what they 
have given for it. They rarely get the higher wages for 
any long time, unless the working of the first law of sup- 
ply and demand (Prop. VI) would have soon given them 
these wages without a strike. For such artificial changes 
in wages only interrupt, not destroy, the natural law laid 
down in Proposition XII. Despite all that employers 
or employees can do, that law will in the long run fix 
wages. 

Suppose 1,000 men, each earning $3 a day or $3,000 
a day together, strike for three months in order to get 
$3.50 a day. The strike will cost them the wages they 
would have earned, or $3,000 a day. Its total cost for 
the eighty working days in the three months will be 
eighty times $3,000 or $240,000. When they resume 
work at $3.50 a day, they will receive fifty cents apiece, 
or $500 together a day more than before. This is what 
the strike pays them. It will be necessary for them to 
work 480 days (or, including Sundays, over eighteen 
months) before they have made up the money they lost 
by the strike; for the loss was $240,000, and $500 a day 
for 480 days just equals $240,000. Not until the eigh- 
teen months are over will the successful strike have 
added a cent to their incomes. But it is very improbable 
that they will get the $3.50 for eighteen months, unless 
the law of wages wouid, before the eighteen months were 
over, have given it to them at any rate. And in that 
event the money spent on the strike was simply wasted. 

In order that a strike shall succeed, three things are 
absolutely necessary : First, the real wage-fund must be 
less than the possible wage-fund ; for if the two coin- 
cide, no power whatever (see proof of Prop. XI) can 
raise wages ; second, the men must have means of subsist- 
ence for some time ; third, they must not only stop work 
themselves, but they must persuade or compel all their 
fellow-workmen to refuse to work for this particular 
employer. If they compel them to refuse, they are liable 



PRIMER OF POLITICAL ECONOMY. 37 

to be fined or imprisoned ; for a man has a right to sell 
his labor to anybody engaged in honest business, and 
compelling him to give up this right is a crime. 

While, then, a strike may sometimes succeed, the 
chances are greatly against it ; and if it does succeed, it 
rarely repays its cost. 

Therefore, it is bad policy to strike. 

PROPOSITION XX. 

It is to the advantage of both employers and employees 
to settle their disputes by arbitration. 

This method of settlement is as follows : The em- 
ployers and the employees together choose one or 
more persons who are to act as the judge or judges of 
the dispute. Before the court thus formed each side 
states its grievances and its wishes. The workmen ex- 
plain, for instance, why they think their wages should be 
increased, and the employers tell what reasons they have 
for not raising wages. The judges, having heard both 
sides fully, decide which is right. 

As the judges are chosen for their integrity and fair- 
ness by both the parties to the quarrel, this decision 
usually satisfies both sides. As masters and men agreed 
to submit the question to these judges, both parties are 
bound, in honor, to obey the decision that is given. 
They usually do so. Thus an interruption of work and 
a waste of wealth by a strike or a lock-out are prevented, 
and good feeling is preserved between masters and 
men. 

Mr. Walter Morrison, a Member of Parliament, and 
Judge Rupert Kettle, both of England, have persuaded 
the employers and employees in a number of English 
manufacturing towns to establish permanent boards of 
arbitration. Half of the members of these boards are 
elected by the masters, and half by the men. They 
have decided very many trade disputes, and have saved 
millions of dollars that would have been wasted if the 



38 PRIMER OF POLITICAL ECONOMY. 

men interested had struck against the masters, or if the 
masters had locked-out the men. 

In France, there are regular arbitration courts (called 
*' Conseils des Prud'hommes "), organized under the laws 
of the country. These courts consist of a President and 
Vice-President, appointed by the government, and six 
other persons, who are elected by the employers and em- 
ployees. No salaries are paid, so that arbitration is cheap. 
A committee of the judges, consisting of one employer 
and one workman, holds almost daily sessions. Thomas 
Brassey says in his " Work and Wages ": " The result in 
95 out of ICO cases brought before these tribunals is a 
reconciliation between the parties, and although appeals 
are permitted to the superior courts of law they are 
rarely made. Lord Brougham, in a speech in the House 
of Lords in 1859, declared that 'in 1850, 28,000 disputes 
had been heard before the Conseils des Prud'hommes, 
of which no less than 26,800 were satisfactorily settled.' " 

Arbitration has often prevented wasteful strikes and 
lock-outs in this country. 

Therefore, it is to the advantage of both employers 
and employees to settle their disputes by arbitration. 

PROPOSITION XXI. 

The best way to produce wealth is by co-operation. 

True cooperation exists only when every one who has 
contributed to the production of anything receives a share 
of its proceeds in proportion to the worth of his work. 
If his capital or his labor has done half the work, he 
owns half the product. If he has done T'oo' oooo th part 
of the work, he owns 1000000 th part of the product. 

Cooperation may be productive or distributive. It 
may be between a master and his men, or between the 
men alone. A cooperative coal-mining company is an 
example of cooperative production. A cooperative 
grocery is an example of cooperative distribution. Co- 
operation between master and men exists when the men 



PRIMER OF POLITICAL ECONOMT. 39 

have a share in the profits, outside of their wages. Co- 
operation between men exists when the men have all the 
profits, that is, when the workmen in an establishment 
own the establishment between them. 

Distributive cooperation is safer than productive. 
The capital and skill required in the management of a 
grocery, which usually has a steady circle of customers 
and sells to-day what it bought yesterday, are much less 
than the skill and capital required in the management of 
a coal-mine. The cost of mining the coal is great. A 
good deal of capital is therefore necessary. The cost is 
also rather uncertain. The price at which the product 
can be sold varies from week to week. A great number 
of causes affect it. All these things must be foreseen, as 
far as possible. Great skill is therefore required. 

The best of all forms of cooperation is that between 
master and men. For in this the men gain the use of 
the skill and the capital of the master, and the master 
gains the hearty goodwill and the uttermost skill and en- 
ergy of the men. 

There is little cooperation in America, but a good deal 
of it in England and Germany. 

As an example of cooperative distribution, by work- 
men alone, we will take the Equitable Pioneer Society, 
of Rochdale, a manufacturing town near Manchester, 
England. In 1842, twenty-eight weavers formed this 
company. They were so poor that they could pay into 
the capital-fund only four cents apiece per week. It 
took them two years to accumulate a capital of $140. 
On a December evening, in 1844, " Toad lane," a dingy 
little street in Rochdale, was crowded with a hooting 
rabble, gathered to see the opening of the "weavers' 
shop." When the shutters of the little room the Society 
had hired were taken down, the jeering crowd screamed 
with laughter at the sight of the almost empty shelves 
within. For a long time the twenty-eight weavers were 
the only customers. They could not afford to hire a 
clerk, so they took turns in " keeping store " in the even- 



40 PRIMER OF POLITICAL ECONOMY. 

ings. It was shut during the day. The scanty stock of 
groceries was soon sold. Its proceeds bought a larger 
stock. This went, and the next, and the next, and so on. 
By buying their goods directly from the producers, they 
got them so cheaply that they could sell them below 
the usual prices, pay all the store expenses, and declare 
a small dividend on the capital. In 1845 their capital- 
fund was $910. Their membership was seventy-four. 
Soon they rented a larger room and hired a manager. 
In 1846, they began to sell meat; in 1847, dry goods; in 
1852, boots, shoes and clothing. In 1852 they opened 
a wholesale department. From the start, the weavers 
have kept on weaving. This co-operative store is man- 
aged by persons they employ, but it does not interfere 
with their work. 

The main building of the Society is now the most con- 
spicuous structure in Rochdale. Its top-floor is a plain^ 
comfortable hall, where the monthly meetings of mem- 
bers are held, lectures delivered, and parties given. On 
the floor below are the reading-room and the library. 
The latter has about ten thousand volumes. There are 
eleven branch reading-rooms in the town. The Society 
maintains schools for its members and their children. It 
has a collection of scientific instruments which it loans 
for two or three cents an evening to members who wish 
them for their own instruction or for the entertainment 
of their friends. The two lower floors of the building 
are divided into the different stores the Society owns, and 
the basement is devoted to packing and storage. There 
are branch stores in difi'erent parts of the town, — among 
them eleven butcher-shops and thirteen groceries. The 
Society manufactures tobacco, and has invested some of 
its spare funds in corn, cotton and woolen mills. These 
are properly examples of productive co-operation, how- 
ever, so that we will not discuss them here. In Decem- 
ber, 187 1, the Society began to build homes for its 
members. It now sells them coal. Almost from the 
beginning, it has been their savings bank, receiving de- 
posits at any time and paying interest upon them. 



PRIMER OF POLITICAL ECONOMT. 41 

Mr. George Jacob Holyoake, an English journalist, 
scholar and co-operator, has written a " History of Co- 
operation in Rochdale." We quote this passge from it: 

" These crowds of humble workingmen, who never knew be- 
fore when they put good food in then- mouths, whose every din- 
ner was adulterated, whose shoes let in the water a month too 
soon, whose new coats shone with ' devil's dust,' and whose wives 
wore calicoes that would not wash, now buy in the markets like 
millionaires, and, as far as pureness of food goes, live like lords. 
They are weaving their own stuffs, making their own shoes, 
sewing their own garments, grinding their own corn. They buy 
the purest sugar and the best tea, and grind their own coffee. 
They slaughter their own cattle, and the finest beasts of the land 
waddle down the streets of Rochdale for the consumption of 
flannel-weavers and cobblers. . . . The teetotalers of Roch- 
dale acknowledge that the Store has made more sober men since 
it commenced than all their efforts have been able to make in 
the same time. Husbands who never knew what it was to be 
out of debt, and poor wives who during forty years never had 
sixpence uncondemned in their pockets, now possess little 
stores of money, sufficient to build them cottages, and go every 
week into their own market, with money jingling in their 
pockets. And in that market there is no distrust and no decep- 
tion ; there is no adulteration and no second prices. The whole 
atmosphere is honest." 

The official report of the Society for the three months 
ending June lo, 1873, states the amount of sales for that 
time at f 360,985. This enormous business has been 
built up, and is now controlled, by men who work for 
daily or weekly wages. 

The Equitable Pioneers' Society is organized in this 
way : Anybody who is approved by a majority of the 
Executive Committee and of the members can join the 
Society. He must subscribe for five shares of ^5 each, 
pay an admission fee of 25 cents, and pay 9 cents a week 
until his five shares are all paid for. The money re- 
ceived in this way is the share-capital of the Society. 
There is also a loan-capital, formed by deposits by mem- 
bers. Interest is paid on these deposits and they can be 
withdrawn at any time. While the Society has them, it 
uses them to extend its business. They are, therefore, 
part of its capital. All goods are bought and sold for cash. 



42 PRIMER OF POLITICAL ECONOMY. 

This rule is not proved by its exceptions, because it has no 
exceptions whatever. The Society sells its wares at about 
the market rates, sometimes a trifle lower. The profits 
are divided in this way : The expenses of management 
and the guaranteed interest of 5 per cent, on the loan- 
capital are paid; then a dividend (never above 5 per 
cent.) on the share-capital is declared; then 2% per 
cent, of the remainder is allotted to the educational fund 
(this amounts to over $5,000 a year) ; and the rest is di- 
vided among all the patrons of the Store in proportion to 
their purchases. If one person has bought $20 worth of 
goods, and another $10 worth, the ifirst gets twice as much 
of this dividend on purchases as the second. A non- 
member gets about half as much as a member would. In 
the quarter ending June 10, 1873, the dividend on pur- 
chases was 12^ per cent. A member who had bought 
$100 worth of goods would then get $12.50 back, and a 
non-member who had bought as largely would get $6.25. 

The members of the Equitable Pioneers' Society 
therefore get back part of the price they pay for every- 
thing at their store, get dividends on their shares, get in- 
terest on any savings they deposit with the Saciety, have 
the use of reading-rooms, books, schools, etc., and get 
pure, good, unadulterated wares. Adulteration can be 
prevented only by making the interests of buyer and 
seller identical, and this can be done only by distributive 
co-operation. 

As an example of co-operative production by employ- 
ers and workmen together, we will take the Briggs 
Brothers' Coal-mining Company, in Yorkshire, England. 

The Briggs brothers owned and worked two collieries. 
They were in constant trouble with their men, who were 
a drinking, uproarious, careless set. The men had a 
rough saying, "All coal-owners is devils, but Briggs is 
the prince of devils." This shows how great the ill- 
feeling was. Strikes were frequent. The men took 
holidays, too, on the slightest pretext. A boy, by toss- 
ing up his cap and shouting "Let's stop work for to- 



PRIMER OF POLITICAL ECONOMY. 43 

day ! " could, it is said, induce the whole crowd of boys 
and men to spend the day idly. The cost of taking care 
of the two mines, pumping the water out of them, etc., 
was $i,ooo a day, whether mining was carried on or not. 
Every day, then, that the men did not work was a clear 
loss of at least $i,ooo to the Briggs brothers. They 
only made about 6 per cent, on their capital on an 
average. 

In i860. Prof. Fawcett, a great English statesman and 
politico-economist, published a sketch of a plan for co- 
operation between masters and men. In 1866 the Briggs 
brothers resolved to try this plan. They formed a 
joint-stock company and issued 9,770 shares, worth $50 
each. The men were allowed to buy some of these 
shares, paying for them in installments. Very few of them 
have done this, however. Only 264 shares are now held 
by the workmen. At the same time the Briggs brothers 
announced that the profits would thereafter be divided 
in the following way : First, a dividend of 10 per cent, 
would be paid on all the shares ; second, the remainder 
of the profits would be divided into two equal parts. 
One of these parts would be used to pay an extra divi- 
dend on the capital stock, and the other would be 
divided among all the workmen, whether shareholders or 
not, in proportion to the wages each had earned during 
the year. If A had earned $200 and B $100 during the 
year, A would get twice as much as B of this dividend 
on labor. 

The results of this were remarkable. The men, hav- 
ing a promise of half the profits over 10 per cent, on the 
stock, did all they could to raise the profits above that 
figure. They worked steadily. They were careful of 
the wood and tools used. When a man found a broken 
tool, or anything of the sort, instead of kicking it aside 
as he would once have done, he picked it up and took it 
to the office to be repaired, saying " That's so much 
towards the 'divvy.'" "Divvy" is their pet name for 
dividend. It became the interest of all that each should 



44 PRIMER OF POLITICAL ECONOMY. 

work. They acted as overseers for each other. This 
saved a good deal. Public opinion, which before favored 
dissipation, now opposed it. Idleness, drinking and riot- 
ing were frowned upon. They became far less com- 
mon. The best of good feeling sprang up between the 
Briggs brothers and their men. All questions about 
wages, hours of work, etc., were settled by friendly talks 
or by arbitration. At the end of the first year, under 
the new scheme, the Briggs brothers and the sharehold- 
ing workmen got a dividend of lo per cent, and $8,500 
besides, while another $8,500 was divided among the 
workmen. The second year, the dividend to labor was 
$17,500. The plan has now (1875) been in operation 
about eight years. The Briggs brothers, who, before 
1866-7, got an annual profit of 6 per cent, on their capi- 
tal, are said to have cleared a yearly profit of from 15 to 
17 per cent, ever since. Meanwhile, their workmen, 
whether shareholders or not, have had annual dividends 
on their labor, and part of the profits have been used in 
supporting a library and schools for the benefit of the 
miners and their families. There has been a very 
noticeable advance in the morality, intelligence and 
thrift of the whole body of employees.* 

Co-operation thus prevents strikes, promotes good-will, 
causes honest work, checks wastefulness, saves the ex- 
pense of overseers, offers the workman an opportunity to 
invest his savings at a profit, encourages thrift, morality 
and education, and increases the profits of all the co- 
operators, f 

Therefore, the best way to produce wealth is by 
co-operation. 

* Since this passage was written, a trade-union to which the miners employed 
by the Briggs brothers belonged has compelled them to break up this industrial 
partnership. This action on the part of the union was a piece of barbarous 
stupidity, without excuse. The reason for it is unknown. 

+ Mr. Charles Bradlaugh informs us that in his opinion distributive co- 
operation has been proved a complete success in England, and that product- 
ive co-operation, although tried as yet only in a few cases, promises well. 



PRIMER OF POLITICAL BCONOMT. 45 



PROPOSITION XXII. 

Trade-union funds can be best used in promoting co-opera- 
tion. 

These funds are now used in two ways. First, in help- 
ing members of the particular union to live while they 
cannot find work, and in making up their losses by fire, 
theft, etc. Second, in supporting them while on strike. 
The first use is a good one. The second is apt (Prop. 
XIX) to merely waste the funds. It is rarely advisable. 
The wealth wasted in supporting a set of strikers for 
some weeks or months would often be more than enough, 
if loaned to the men by the union, to enable them to 
buy an interest in their employer's business, or even to 
set them up in business for themselves. 

In 1874, the journeymen shoemakers of Chicago, after 
a long and useless strike against a reduction of wages, 
started a co-operative shoe-manufactory. It failed for 
want of capital. But the wealth furnished by the trade- 
union and unproductively consumed by the shoemakers 
while on strike would have been more than enough 
capital for their manufactory. If it had been loaned to 
them for this purpose at the beginning, and if any of 
them had had sufficient skill to manage the business, 
they could have had both the wages of their labor and 
the profits on it for themselves. As it was, they con- 
sumed the wealth unproductively, cleared no profit on it,- 
and had to go back to work at the lower rates offered by 
their old employers. Some of them could not get work 
at all, because the vacant places had been partly filled 
with shoemakers brought from the East. These unfor- 
tunates had to go to the expense of seeking employment 
in other cities. 

Trade-unions should use their funds in this way. As 
soon as a union accumulates a few hundred or thousand 
dollars above the amount it needs for the relief of tem- 
porary distress among its members, it should loan this 
surplus, with proper precautions for its repayment, to the 



46 PRIMER OF POLITICAL ECONOMT. 

set of its members which would pay most for the use of 
it. These men should then employ it in productive or 
distributive co-operation. By the former they could 
raise their wages in money, and so in purchasing power. 
By the latter, they could raise them in purchasing power 
by cheapening the prices of the necessaries of life. 
They would gradually repay the loan out of their extra 
profits. Meanwhile, the trade-union would accumulate 
another surplus, and loan that in the same way. This 
would be repeated again and again, until at length all, 
the members of the union would become small capital- 
ists as well as laborers, getting profits on their capital 
and wages on their labor. 

At present, trade-union funds do only temporary good 
to the members of the union. Under the system here 
proposed, the funds would do the members permanent 
good. 

Therefore, trade-union funds can be best used in pro- 
moting co-operation. 

PROPOSITION XXIII. 

Wealth, when produced, is divided into rent, profits and 
wages. 

We have seen (Prop. I) that three things are needed 
to produce wealth, — natural agents, capital and labor. 
Each of the three must be paid for, except (Prop. II) 
the natural agents which are practically unlimited in 
quantity, and therefore are not wealth. Rent* is the 
portion of the product which pays for the limited natural 
agents ; profits, the portion which pays for the capital ; 
and wages, the portion which pays for the labor. 

Suppose A rents an iron-mine and the land on which 
his smelting works stand for $10,000 a year. He pays 
wages of $70,000 a year. The annual product of his 
works is 100,000 bars of iron worth $1 apiece. Then 

* Notice the difference between this meaning of '' rent " and iti ordinary 
meaning. 



PRIMER OF POLITICAL ECONOMY 47 

the fioo,ooo of wealth produced will be divided into 
rent of $10,000, wages of $70,000 and profits of $20,000. 
If A has had charge of the business, the $20,000 
will be partly profits, and partly his wages as general 
manager. 

The real profits are usually smaller than the apparent 
ones, because the portion of the product allotted to the 
capitalist is usually partly composed of his wages. His 
mental labor has as much right to reward as the mental 
or bodily labor of his employees. It is not correct to in- 
clude the wages he earns in the profits his capital earns. 

Since there can be no production (Prop. I) if any one 
of the three factors does not aid the other two, it is right 
that every one of the three should be rewarded for its 
aid. Thus capital has as much right to its profits as 
labor has to its wages. 

The limited natural agents, capital and labor, are all 
wealth. Therefore (Def. 4) something can be got in ex- 
change for them. And hence, since all three are used 
in producing wealth, the owners of each get something 
in exchange for it from the wealth produced. 

Therefore, wealth, when produced, is divided into 
rent, profits and wages. 

PROPOSITION XXIV. 

Wealth is sometimes shared between three classes, and 
sometimes between two, and is sometimes absorbed by 
one. 

When the land, the capital and the labor used in pro- 
duction are furnished by three different persons, or sets 
of persons, the first gets the rent, the second the profits, 
and the third the wages. 

But when one class furnishes any two of these three 
productive powers, the wealth is shared between two 
classes. For if one man owns the land and the capital, 
he gets both the rent and the profits. The other per- 
sons, who furnish the labor, get the wages. If some 



48 PRIMER OF POLITICAL ECONOMY. 

agricultural laborers rent a farm and cultivate it, they will 
get the profits and wages, and the landowner will get the 
rent. If a landowner borrows some capital to use on his 
land and does the necessary work himself, he will get the 
rent and the wages, and the part of the profits earned by 
his capital, and the lender of the rest of the capital will 
get the rest of the profits. 

When one man owns the land, the capital and the 
labor (his own or that of slaves), he gets rent, profits, and 
wages. A market-gardener may own a piece of land and 
the capital used in cultivating it, and may do all the 
necessary work himself. Then he gets rent, profits and 
wages. That is, all the wealth produced by his land, 
his capital and his labor belongs to him. 

Therefore, wealth is sometimes shared between three 
classes, and sometimes between two, and is sometimes 
absorbed by one, 

PROPOSITION XXV. 

The first law of supply and demand fixes the proportion of 
rent, profits and wages to each other. 

If there is a great deal of land seeking employment 
and a comparatively small demand for land, then (Prop. 
VI) the price paid for its use will be small, and therefore 
the rent will take but a small part of the product. If 
the supply of land does not equal the demand for it, then 
(Prop. VI) the rent will be a larger part of the product. 

In the same way, the ratio of demand to supply will 
decide what part of the product shall be used to pay 
profits, and what part to pay wages. 

Therefore, the first law of supply and demand fixes 
the proportion of rent, profits and wages to each other. 

DEFINITION 12. Vabie is purchasing power. 

The value of a thing is its power of purchasing other things. 
If a yard of velvet will buy two yards of broadcloth, or three 
yards of linen, the value of velvet is twice that of broadcloth 



PRIMER OF POLITICAL ECONOMY. 49 

and thrice that of linen. If a pound of tea will exchange for 
three pounds of coifee, the value of tea is thrice that of coffee. 

The value of a thing is always found by comparing it with 
Other things. 

DEFINITION 13. Price is value expressed in money. 

For the sake of convenience, one universal standard ot value 
has been taken. This standard is money- It is a common de- 
nominator of values. Instead of saying that the value of a 
pound of tea is three times the value of a pound of coffee, we 
say that tea is worth 90 cents and coffee 30 cents a pound. 

'When the value of a thing is expressed in money, it is called 
its price. 

PROPOSITION XXVI. 

There cannot be a general rise or fall in values. 

Suppose there were only two things in the world, one 
named A and the other B. There could not be a gen- 
eral rise in their value. For the value of a thing (Def. 
12) is its power of purchasing other things. If A rises 
in value, it must buy more of B. Then it will take more 
of B to buy A. B's value will therefore be less. Thus, 
if A rises in value, B must fall in value. And if B rises 
in value, it must buy more of A. That is, A must fall in 
value. Since each must fall in order that the other may 
rise, in value, they cannot rise together. 

What is thus true of two things is equally true of 
three, four and all things. In order that one may rise 
in value, others must fall. And so, if one falls in value, 
others must rise. For the one will then have less pur- 
chasing power. That is, it will Lmv less of other com- 
modities. The others, then, will buy more of it. They 
will therefore have more value. 

Suppose one pound of tea will buy three pounds of 
coffee or four pounds of sugar. Their values, compared 
with each other, cannot all rise together ; for if tea grows 
so dear that one pound of it will buy four pounds of 
coffee or five pounds of sugar, then the value of coffee 
4 



60 PRIMER OF POLITICAL ECONOMT. 

and sugar has fallen. It takes more of each of them to 
buy a pound of tea. 

Thus, in order that one thing may rise in value, others 
must fall. And vice versa. 

Therefore, there cannot be a general rise or fall in 
values. 

PROPOSITION XXVII. 
There may be a general rise or fall in prices. 

One thing may rise in value, but in order that it may 
do so, other things (Prop. XXVI) must fall. If money 
rises in value, it will take less of it to buy other com- 
modities. Therefore, general prices will fall. If money 
falls in value, it will take more of it to buy other com- 
modities. Therefore, general prices will rise. 

If tea has been selling for 90 cents, coffee for 30, and 
sugar for 221^, a pound, and a scanty supply (Prop. VI) 
forces their prices up to f 1.80, 60 and 45 cents a pound, 
the value of money, so far as they are concerned, will 
have fallen. A dollar will not exchange for as much of 
them as it used to. There has been a general rise in 
their prices, but there has been, neither rise nor fall in 
their values, compared with each other. For a pound of 
tea, before the rise in price, would have bought three 
pounds of coffee or four of sugar, and it will buy pre- 
cisely the same amount now. 

Therefore, there may be a general rise or fall in 
prices. 

PROPOSITION XXVIII. 

The value of a thing depends upon the cost of its production. 

No commodity will be produced unless there is a de- 
mand (Def. 6) for it. Neither will a commodity be pro- 
duced unless those who want it are willing to give in 
exchange for it something of equal value. For, since it 



. PRIMER OF POLITICAL ECONOMY. 51 

always costs something to produce a commodity, the 
producer will not be willing to exchange it for less than 
it cost him. This cost is called the cost of production. 
Since the article will not be exchanged for less than its 
cost of production, its value (Def. 12) must depend upon 
this. 

The cost of production consists of the limited natural 
agents used up, the mental and bodily labor expended, 
and the capital consumed, in the production. Both the 
labor and the wages paid for it are to be reckoned, for the 
first is the sacrifice or cost of the laborer, and the second 
is part of the sacrifice or cost of the capitalist. 

The cost of production fixes the intrinsic value, that 
is, the value at which the article can be exchanged 
without loss. Its market value is somewhat greater than 
this, because the capitalist sells it at a profit. If he 
made no profit, he would not care to use his capital in 
producing the commodity. 

Intrinsic value is fixed. Market value varies with 
supply and demand (Prop. VI). It may sometimes even 
fall below intrinsic value, but if it does so for any length 
of time, production (Prop. VII) will slacken and the 
consequent diminished supply (Prop. VI) will send up 
the market value again. 

Therefore, the value of a thing depends upon the cost 
of its production. 

PROPOSITION XXIX. 

In every fair bargain, both parties gain. 

One man's gain cannot be another man's loss, in trade, 
except in cases of ignorance or deceit. 

If a man in England exchanges steel for cotton with a 
man in America, each is a gainer. The value of the 
steel is equal to the value of the cotton, or the exchange 
would not be made. Each now has what he wants, 
whereas each before had what he wanted to part with. 



63 PRIMER OF POLITICAL ECONOMT . 

The Englishman wanted the cotton more than he did 
the steel. The American wanted the steel more than he 
did the cotton. Each has his greater want gratified. 
So both have gained. 

What is true of the Englishman and the American is 
true of the New York merchant and the Iowa farmer, or 
of a million Englishmen and a million Americans. 

Therefore, in every fair bargain, both parties gain. 



PROPOSITION XXX. 

The first method of exchange, barter, is unfit for use in a 
civilized community. 

Barter is the exchange of one thing for another with- 
out the use of money. This was the first method of 
exchange. It is the way in which all buying and selling 
is still carried on in some barbarous communities. If a 
savage has more food than he can eat, he exchanges the 
surplus for something he needs, — a skin or a bow and 
arrows. 

This method of exchange is inconvenient. It would 
not be practicable among civilized people. 

A tailor has only clothes to sell. If he wanted a loaf 
of bread and barter still prevailed, he would have to 
offer a baker some article of clothing, a coat for instance, 
in exchange for bread. But probably the baker would 
have all the coats he needed. He might say he wanted 
a stove. Then the tailor would have to find a stove- 
maker who was willing to exchange a stove for a coat ; 
get a stove in this way; and then give the baker the 
stove for the bread. If he could find no such stove- 
maker, he would have to hunt for another baker. " He 
might starve before he could find any person having 
bread to sell who wanted a coat ; besides, he would not 
want as much bread at a time as would be worth a coat, 
and the coat could not be divided."* 

*John Stuart Mill. 



PRIMER OF POLITICAL ECONOMY. 53 

What is true of the exchange between the tailor and 
the baker is true of all other exchanges. It is easy to 
see, then, that barter hinders trade. 

Therefore, the first method of exchange, barter, is 
unfit for use in a civilized community. 

PROPOSITION XXXI. 

The great instrument of exchange is money. 

The impossibility of carrying on trade in civilized 
countries by barter made the introduction of money 
a necessity. Money is the great medium of exchange. 
Whoever has enough money can buy whatever is offered 
for sale. 

The tailor mentioned in the last proposition could get 
the bread he wanted of the baker if he had money. It 
is by means of money that the lawyer exchanges his 
legal ability for his food, clothing, rent, etc., and that a 
teacher exchanges his learning for rent, groceries, clothes, 
etc. The teacher first sells his learning for money, and 
then he sells his money for groceries, clothes, fuel, the 
use of a house, etc. 

The same thing is true of all civilized men. Take the 
case of a shoe-dealer. His wealth is in shoes. Through 
the medium of money, he exchanges his shoes for what- 
ever he wants. He sells his shoes for money, and then 
sells the money for leather, or bread, or a ticket to a con- 
cert, or anything else. 

Therefore, the great instrument of exchange is money. 

PROPOSITION XXXII. 

Money is the measure of values. 

Lengths are measured by inches, feet, yards, etc. ; 
weights by ounces, pounds, etc, ; time by minutes, hours, 
days, and years ; and values are measured by money. 

Money may therefore be defined as the medium of 
exchange and the measure of values. 



54 PRIMER OF POLITICAL ECONOMT. 

If there were no measure of values, it would be diffi- 
cult to tell at any time how much of one commodity- 
should be given in exchange for another. It would be 
impossible to know how much any man was worth with- 
out naming all the things he owned, one after another. 

When the tailor wishes to let his customer know the 
value of a coat, he expresses that value in money. When 
a man wishes to tell how rich he is, he expresses it in 
money, too. 

Therefore, money is the measure of values. 

PROPOSITION XXXIII. 

Money in specie is like all other commodities. 

Money in specie is gold or silver money. Paper 
money is not specie. Specie money is a commodity like all 
other commodities. Gold and silver, whether coined or 
not, are commodities, just as iron and lead are. 

The value of specie depends upon the cost of pro- 
duction, as the value of all other commodities does. 
The value of specie money is the value of the metal com- 
posing it, and the cost of coining it. The value of the 
metal depends upon the cost of producing it, that is, the 
cost of getting it out of the mine and of freeing it ifrom 
impurities. 

The value of specie is affected by demand and supply, 
just as all other values are. If the stock of gold greatly 
increases, an ounce of gold will exchange for less food, 
clothes, or anything else. If the stock of gold decreases, 
an ounce of it will exchange for more food, clothing, etc. 

All the other natural laws affecting commodities 
apply to gold and silver. 

Therefore, money in speck is like all other com- 
modities. 



PRIMER OF POLITICAL ECONOMT. 55 

PROPOSITION XXXIV. 

Gold and silver make the best money. 

The thing which is to serve as money should — 
(i) have large value in small space and weight, be- 
cause otherwise nobody could carry about with him 
enough to buy what he needed, from time to time ; and 
if he bought on credit, much time and labor would have 
to be spent in finally taking a large, heavy substance to 
the stores in settlement of the bills ; 

(2) be steady in value, because something which 
changes its own value continually cannot measure the 
values of other things ; 

(3) be durable, for if it continually wasted away its 
value would diminish every day and every minute ; 

(4) be indefinitely divisible, for otherwise it could not 
represent small values, and change could not be made ; 

(5) be capable of receiving and retaining delicate 
marks, in order that the different pieces of money should 
be readily recognized, even after they have been used for 
a long time ; 

(6) be easily distinguished even from similar sub- 
stances, for otherwise counterfeits will be put in circula- 
tion by bad men ; and 

(7) be recognized as money by the civilized world, 
because it has to be used to make exchanges between 
citizens of different nations as well as between those of 
the same nation. 

Gold and silver fulfill, better than any other known 
substance, these seven requisites for money : 

(i) They have large value in small space and weight. 
No other substance, which exists in sufficient quantity 
to be used as money, contains as much value as gold 
does in equal space and weight. 

(2) They are steady in value. Since history began, 
there has been only one considerable change in their 
value. This was after the discovery of the South Amer- 
ican and the Mexican mines. Even then, the change was 



56 PRIMER OF POLITICAL BCONOM2'. 

not at all sudden. It took a great number of years to 
accomplish it. All other commodities have undergone 
repeated and sudden changes in value. It costs just 
about as much now to extract an ounce of gold or silver 
from the earth, purify it and coin it as it has cost for very 
many years. Since the cost of production is steady, the 
value (Prop. XXVIII) must be steady. 

(3) They are very durable. Coins buried for ages 
have been dug up in Egypt which retain their former 
color and designs almost perfectly. 

(4) They are indefinitely divisible. They lose noth- 
ing, too, by being divided. An ounce of gold is worth 
just as much, no matter into how many pieces it is 
divided. If a large diamond were quartered, it would 
lose 99 per cent, of its value. 

(5) They can be easily coined, and they retain the 
forms and designs given them for a very great number of 
years. 

(6) They cannot be easily imitated. Counterfeits of 
them, though made with cunning care, can be readily 
detected. The " ring " of gold and silver cannot be 
produced by any baser metal. 

(7) They are the only substances recognized as money 
by the whole civilized world. 

Therefore, gold and silver make the best money. 



PROPOSITION XXXV. 
Paper money, not convertible into specie at par, is an evil. 

The measure of length must have length ; the measure 
of weight must have weight ; the measure of values 
must have value. Paper money has only a sham 
value, unless it is convertible into specie at par. If 
you can get a gold dollar by presenting a paper dollar 
at the bank which issues it, then paper is as good as 
gold, because everything is worth what it will exchange 
for. Paper is more convenient to carry than gold. This 



PRIMER OF POLITICAL ECONOMT. 57 

is the reason it is used by communities whose paper- 
money is convertible into specie. 

Inconvertible paper money has a sham value, because 
the value at which it exchanges does not depend upon 
its cost of production. It costs only about one mill to 
produce a paper dollar. The reason it exchanges for 
more than one mill is because the bank or government 
issuing it promises to redeem it in specie some time. 
The chance of its being worth par in gold some time 
makes it worth something in gold now. But since its 
value depends upon this chance, it must change with 
the chance. The chance changes from day to day, and 
so the value of paper money changes. 

This changing value makes it unfit to measure values, 
just as a stick which was 30 inches long to-day and 25 
to-morrow and 27 the day after, would be unfit to 
measure length. 

If it cannot measure values accurately, it cannot be a 
good medium of exchange. Suppose the tailor is willing 
to sell a coat for $20 in gold, he will not take $20 in 
inconvertible paper for it, because the value of such 
money changes from day to day, and so the $20 bill may 
not be worth as much as a $20 gold piece to-morrow. 
If $1 in paper is worth that day 50 cents in gold, he will 
charge about $45 for the coat. The $40 will equal the 
$20 gold piece, and the extra $5 will be a protection 
against his losing very much if the paper loses any more 
value. If a paper dollar is worth, the day after he sells 
the coat, only 40 cents in gold, then his $45 is worth only 
(45X40 cents=) $18, and he has then exchanged the 
coat for $2 less than its value, despite his extra charge 
of $5. If he had not made this extra charge, what he 
got in exchange for the coat would be worth only 
(40X40 cents=) $16. Then his loss would be $4. 

When the money.'used by a nation changes value in this 
way, all dealers make this extra charge to protect them- 
selves against loss in case the paper loses any more value. 
They sell their wares for as much paper money as 



58 PRIMER OF POLITICAL ECONOMT. 

will buy, that day, the gold which the wares are worth, 
plus something more as an insurance against loss by the 
depreciation of the paper. The wholesale dealer charges 
this increased price to the retailer ; the retailer charges 
\t,phts his own increased price, to the consumer. The 
consumer therefore finally pays all these extra charges, 
all of which he would escape, if the currency used were 
gold or silver, or paper convertible into specie at par. 
Poor people usually buy their goods of the last of a long 
line of wholesale and retail dealers. Each one of the 
line has charged this extra price. The poor therefore 
suffer most, in this as in other ways, from the use of in- 
convertible paper money. 

Such money has a large (sham) value in small space 
and weight, but if the chance of its being some time re- 
deemed in specie ceases to exist, then its market value 
falls to the level of its intrinsic value (see explanation 
of Prop. XXVIII), and every note, whether for one or 
one thousand dollars, is worth about one mill. Incon- 
vertible paper money is very unsteady in value. The 
greenback dollar has varied in value all the way from $i 
to 35 cents in gold. Such money is not very durable. 
It can, to be sure, be divided indefinitely. The stamps 
on it soon wear away. It can be counterfeited with 
comparative ease. It circulates as money only within 
the country of the government issuing it. When a bank 
issues it, it circulates only near that bank. It forms no 
part of the world's money. 

Therefore, paper money, not convertible into specie at 
par is an evil. 



PROPOSITION XXXVI. 

The worse currency drives out the better. 

When there are two legal sorts of currency in a 
country, the worse will drive out the better. Gold and 
greenbacks are both legal mediums of exchange in this 



PRIMER OF POLITICAL ECONOMY. 59 

country now (1875), but the greenbacks, which are the 
worse currency, have driven out the gold. 

Suppose a shoe-manufacturer borrowed $100 in gold 
when we had a gold currency, and must repay the loan 
now (1875), when a gold dollar is worth $1.12 in green- 
backs. His shoes will sell for %2 a pair in gold, and 
about $2.50 a pair in greenbacks. If he pays the debt 
in gold he will have to part with fifty pairs of shoes. If 
he pays it in greenbacks he will have to part with only 
40 pairs. It will therefore be cheaper for him to use 
greenbacks. The creditor will lose by it though, because 
he lent $100 in gold and he gets back $100 in green- 
backs, which are worth only about ^89 in gold. It is 
one bad result of a double currency that debtor can 
thus defraud his creditor. 

When a debtor has to pay his debt, and can pay it in 
a bad and cheap or a good and costly currency, he will 
use the cheap currency. Every debtor will do this. 
There will therefore be no demand for the good cur- 
rency, and it will disappear from the market. 

Therefore, the worse currency drives out the better. 

PROPOSITION XXXVIL 

Credit is not capital. 

Capital (Def. 4) is wealth saved and used in production. 
Credit has not been saved. When a bank or a government 
issues a note of $100, no capital has been created. 
The note, if convertible into specie, represents specie 
and is as good as specie, but issuing it has not created 
the specie it represents. That existed already. Issuing 
the note has merely changed the owner of the specie. 
A has ^100 in gold. He gives B in exchange for food, 
clothing, etc., his promise to pay $100. The total capi- 
tal of the two is still only $100, plus the food and 
clothing unconsumed, but now B owns the $100 instead 
of A. B can claim it from A at any time. There has 
therefore been no creation of capital by creating credit. 



60 PRIMER OF POLITICAL ECONOMT. 

Credit is not in itself capital. It is a lease of capital 
which enables a man to get the use of capital for a time, 
just as a lease written on a piece of parchment, which is 
not land, enables its holder to occupy and use land, for 
the time. 

The creation of credit transfers the use of capital. A 
has $ioo. He lends it to B, taking in return B's written 
promise to pay him (A) $ioo, with interest, at some 
future time. Thus A's giving B credit has transferred 
the use of A's money to B. It has not created any more 
money or wealth. But if credit were capital, the world's 
wealth would now be increased by $ioo, since all capital 
is wealth. 

If there were no credit, there could be no lenders, and 
therefore no borrowers. Only those who could use 
capital for their own purposes would accumulate it at all. 
Credit, by transferring the use of wealth from those who 
would not use the wealth productively to those who will, 
makes the wealth capital. But it is not itself capital, 
because it is not wealth that has been saved. 

Therefore, credit is not capital. 

PROPOSITION XXXVIII. 

A commercial crisis is caused by the destruction, that is, 
the unproductive consumption, of wealth. 

There are times when credit ceases; when prices 
suddenly fall ; when merchants fail ; when manufactures 
slacken ; when wages decHne and great numbers of la- 
borers are thrown out of employment ; and when bankers 
cease to loan money, and are unable to pay back the 
deposits which have been made at their banks. When 
this state of things exists, there is said to be a commercial 
crisis. 

Let us see what causes all this. It is at the banks 
that a crisis first shows itself. We will best understand 
what a crisis is, therefore, by beginning to study it at the 
banks. 



PRIMER OF POLITICAL ECONOMY. 61 

Banks gather up the savings which are made by one 
clasb of the community and loan them to another class 
to be employed in the production of wealth. Every 
Ji,ooo loaned by the savings banks is said to give em- 
ployment, on an average, to one laborer. Let us sup- 
pose that one thousand persons each deposit $i,ooo in a 
bank for safe -keeping. If it is left on deposit long 
enough, the bank will pay the owner 4 or 5 per cent, 
interest on it. but the bank must make more than 4 or 
5 per cent., by loaning the deposit. If it did not, it 
would lose money. It therefore loans its deposits at 8 
or 10 or 12 per cent, to persons employed in the produc- 
tion of wealth. Its profit consists in the difference be- 
tween the interest it pays and the interest it gets. 

Let us suppose that the $1,000,000 deposited by the 
thousand persons is loaned out to build a railroad. 
Then this amount of capital takes the form of a railroad. 
If the railroad was wanted, the company that built it 
will be repaid by the receipts from freights, fares, etc. 
The company can therefore repay the banker, and the 
banker his depositors. But if the railroad has been 
built where it was not needed, so that no use, or very 
little use, is made of it after it is built, then the company 
will receive nothing or almost nothing from freights, 
fares, etc. It will therefore be unable to pay the banker, 
and the banker therefore cannot pay his depositors. 

What is the consequence of this .? 

The depositors run to the bank. The bank cannot 
pay them. It closes. The railroad company can get no 
more loans. It h^s to stop work. The labor employed 
in taking care of the part of the road already built, and 
in building the other part is thrown out of work. There 
is now less demand for rails, locomotives, cars, etc. The 
manufacturers of these things dismiss some of their 
hands and slacken work. But if less railroad iron is 
wanted, fewer men will be wanted to work the iron mines 
and to carry the ore from the mines to the places where 
it is made into rails, locomotives, car-wheels, etc. This 



62 PRIMER OF POLITICAL ECONOMT. 

has all happened because a railroad was produced which 
was not needed, that is, because f 1,000,000 of deposits 
was consumed unproductively, or destroyed ; for unpro- 
ductive consumption and destruction are the same. 

The unproductive consumption of the $1,000,000 has 
had several bad effects : 

\) It caused the bank to close; 
2) It made the depositors lose their money; 
'3) It threw railroad employees out of work ; 

(4) It stopped the iron works where railroad iron was 
being manufactured ; 

(5) It diminished the demand for iron at the mines; 

(6) It threw out of employment a number of miners, 
ore-carriers and iron-workers ; 

(7) It slackened all kinds of business, for the laborers 
thrown out of employment could not buy of the grocer, 
dry goods merchant, shoemaker, etc., as before ; 

(8) Consequently, the retail grocer, shoemaker, etc., 
were unable to buy of the wholesale dealers in groceries, 
boots and shoes, etc. 

(9) Therefore, the wholesale dealers stopped buying, 
and the demand for all these articles was less, and con- 
sequently the production of them diminished. 

All these evils, then, felt throughout the whole com- 
mercial body, have resulted from the destruction of the 
$1,000,000 worth of capital. The dollars themselves 
have not been consumed, but the food and clothing of 
the laborers they hired, and the wood, rails, bridges, 
rolling-stock, etc., which they bought have all been spent 
without producing wealth. Thus, although the dollars 
themselves are still in existence, $1,000,000 worth of 
capital has been destroyed. 

Now we have only to suppose that a great many 
millions have been consumed unproductively in a great 
many other ways in order to account for all these effects 
on a greater scale. But when these things happen on a 
great scale, we have a commercial crisis. 

Therefore, a commercial crisis is caused by the destruc- 
tion, that is, the unproductive consumption, of wealth. 



PRIMER OF POLITICAL ECONOMY 63 



PROPOSITION XXXIX. 

The effects of a commercial crisis can be removed only by 
the production of wealth. 

The destruction of wealth (Prop. XXXVIII) causes a 
crisis ; the production of wealth, therefore, by removing 
the cause, must remove the effect, — that is, the crisis. 

As wealth is produced, it is deposited in banks for 
investment, or it is used in production without being 
first put in the banks. Then the laborers thrown out of 
work by the crisis are employed again. They are there- 
fore able to buy again of the grocer, baker, shoemaker, 
etc. The latter buy fresh stocks of goods from the 
wholesale dealers. The wholesalers in turn give orders 
to the producers. 

Thus business revives and times are said to be good. 
Wealth is produced and the effects of the crisis disappear. 

Therefore, the effects of a commercial crisis can be 
removed only by the production of wealth. 

DEFINITION 14. A tax is a sum of money collected by 
. a government from persons or property within its domin- 
ions. 

DEFINITION 15. Duties are taxes on imported goods ^ 
that is, on goods brought from other countries. 

DEFINITION 16. A tariff is a law fixing duties. 

There are two kinds of tariffs, — revenue and protective. 

A revenue tariff is one the only object of which is to raise 
money for the needs of the government. A country which has 
a revenue tariff is said to enjoy " free trade." Its government 
does not interfere with its trade with foreign countries except 
for the sake of raising needed revenue. 

A protective tariff is one which fixes duties in such a way 
that the home manufacturer can afford to produce and sell a 
commodity more cheaply than it can be sold after it has been 
imported, and the duty on it has been paid. The home manu- 



64 PRIMER OF POLITICAL ECONOMT. 



facturer is then said to be " protected " against the competition 
of his foreign rivals. 

A revenue tariff is for the benefit of the government. A pro- 
tective tariff, while it yields some rer-enue to the government, is 
mainly for the benefit of the manufacturers. 



PROPOSITION XL. 

A tariff should be for revenue alone. 

A protective tariff is an injustice and a hardship. An 
illustration will suffice to show what is meant by this. 
Suppose a man wants to buy cloth with which to make a 
coat. England manufactures some of the best cloth in 
the world. He says he will buy English cloth. It is 
better and cheaper. Now if trade were free, he might 
buy the cloth, we will say, for %\ a yard when imported 
here. American cloth of perhaps not as good quality is 
selling for $1.50 a yard. To keep him from purchasing 
the English cloth, and to compel him to buy the Ameri- 
can, the government adds to the price of the English 
cloth, say 60 cents, as an extra duty. It is now worth 
$1.60, which is more than the buyer can afford to pay. 
He therefore buys the American cloth for $1.50. 

Now, who has been the gainer by this 1 The Ameri- 
can manufacturer. The buyer has lost 50 cents on each 
yard. And as the manufacturers are few, while those 
who use cloth are many, the whole country is made to 
pay out large sums by a protective tariff for the benefit 
of the few. This is why a protective tariff is an injustice 
and a hardship. 

There are other reasons why trade between different 
countries should be free. 

When it is free, each country produces those things for 
which it is best adapted, that is, which it can produce 
cheapest and best. France can produce very good and 
very cheap silk. England is not adapted to the cul- 
tivation of the mulberry-trees on which the silk-worms 
feed, and therefore cannot well produce good silk. But 



PRIMER OF POLITICAL ECONOMT. 65 

it can produce very good and very cheap cutlery. It is 
best then that it should produce good cutlery and ex- 
chang'e it for good French silk. If each country had to 
produce its own silk and its own cutlery, the result would 
be that France would have some very poor but very dear 
cutlery, while England would have some very poor but 
very dear silk. Both countries would suffer, and only 
the few engaged in the manufacture of the poor but 
" protected " articles would gain. 

The government has no right to tax one man to benefit 
another. It should treat all men alike. A man has a 
right to buy wherever he can buy best and cheapest ; but 
this right he cannot have when trade is not free. 

It is claimed that a protective tariff benefits a country 
by stimulating its manufactures, and so making it inde- 
pendent of other countries and by securing employment 
for its workpeople. 

But there is no more reason why a country should buy 
nothing from other countries than there is why a man 
should buy nothing of other men. 

Suppose a man had to produce and manufacture his 
own food, clot*hing, house, shoes, books, church, and 
everything else. He would not produce nearly as much 
wealth in a year (Prop. X) as if he should make one 
thing, shoes for instance, and sell them for money, and 
then sell the money for his food, clothing, house-rent, 
books, pew, etc. So a country, by manufacturing the 
things which it can manufacture best, produces more 
wealth than if it were to try to manufacture everything. 
It can then exchange its surplus wealth for the special 
products of other countries, just as the shoemaker ex- 
changes his surplus shoes for the products of the tailor, 
farmer, etc. 

A protective tariff does not increase the number of 
workmen employed. It does not increase the capital in 
a country, and it therefore cannot (Prop. V) increase 
the amount of labor employed. It is true that if the 
" protected " commodities were produced abroad and im- 



66 PRIMER OF POLITICAL ECONOMT. 

ported, as some of them would be under a revenue 
tariff, they would not be produced at home, at least in 
such quantities as they are when "protected." At least 
part of the labor now employed in producing them at 
home would therefore be no longer employed in that way. 
It would, however, be employed in another way. For, 
in order to pay for the goods imported, we would have 
to export other goods. Therefore there would have to 
be a greater production of the latter. The labor hitherto 
employed in producing at home the goods now imported 
from abroad, would now be employed in producing the 
goods exported to pay for these imports. 

A high tariff " protects " only the manufacturers. The 
higher profits they make must be paid, of course, by 
the men not engaged in manufactures, — the ministers, 
lawyers, teachers, doctors, journalists, grocers, farmers, 
bakers, laborers, etc., etc. The number of persons, em- 
ployers and employees, engaged in every sort of manu- 
facture in this country in 1870 was only 2,707,421. The 
number of farmers alone was 5,922,471. Thus the many 
are taxed by a protective tariff for the benefit of the few. 

Moreover, the persons engaged in manufactures all 
pay higher prices for the manufactured articles they con- 
sume than they would were there no protective tariff. 
Thus the few who gain directly also lose indirectly. 

Again, the manufacturers of the protected commodi- 
ties get a higher profit than they otherwise would on 
what they sell in the home-market, but they are restrict- 
ed to this market by a protective tariff. Such a tariff 
shuts them out from the markets of the world. American 
axe-manufacturers, for instance, used to sell their wares 
over the whole world. Now, they cannot compete with 
the English manufacturers. For a high tariff has made 
some of their raw materials, their machinery and their 
labor cost so much that they can no longer produce 
good axes as cheaply as the English can. They are 
therefore undersold in all foreign countries, and can 
sell nothing outside of the United States. Their higher 



PRIMER OF POLITICAL ECONOMY. 67 

profits in the home market are often much more than 
counterbalanced by their loss of the profits they could 
make, were there only a revenue tariff, by foreign trade. 

Suppose the reader, when he next sits down to break- 
fast, should think how much has been added to the cost 
of the things in the room and on the table by the pres- 
ent protective tariff. The table on which the breakfast 
is served is taxed 40 per cent., the table-cloth 42 per 
cent., the dishes, plates, cups and saucers 46 per cent., 
the plated spoons 35 per cent., the knives and forks 60 
per cent., the plated coffee-pot 46 per cent., the china 
tea-pot 38 per cent., the salt 60 per cent., the carpet on 
the dining-room floor 75 per cent., the stove 45 per cent., 
the wall-paper 47 per cent., the glass in the windows 60 
per cent., and the chairs 34 per cent.* If there were a 
revenue tariff, all of these articles could have been im- 
ported and sold at prices much less than we have to pay 
now. The American capital and labor now employed 
in producing some of them would then be used in the 
production of the wealth sent abroad in exchange for 
them. Thus, as much capital and labor would be 
employed and we should have to pay less for many 
necessaries. 

A protective tariff tends to keep foreign articles out of 
the market. Americans produce similar articles and 
sell them at rates just below the cost of the foreign pro- 
duct, plus the duty. Thus a protective tariff yields the 
government much.4ess money than a revenue tariff would. 
It merely gives high profits to a few, and makes the 
many pay much more for the necessaries of life than 
they otherwise would. 

Therefore, a tariff should be for revenue alone. 

* These figures are taken from the tariff of 187.5. 



A SUMMER IN NORWAY. 

With Notes on the Industries, Habits, Custonns and Peculiarities of 

the People, the History and Institutions of the Country, 

its Climate, Topography and Productions ; also an 

account of the Red-deer, Reindeer and Elk. 

BY JOHN DEAN CATON, LL.D. 

Ex-Chief Justice of Illinois. 

8vo. 401 PAGES. Illustrated. Price, $2.50. 

The Tribtme says: 

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to the public a volume of travels which will hold its own with any of like kind. 
The style in which it is written is concise, terse and cheerful. The information 
is solid and interesting, and a vein of genial humor pervades every page. 
Throughout it is generously sprinkled with harmless, amusing incidents, deli- 
cately told." 
The Inter-Ocean says: 

" Judge Caton has given us a work possessing all the best qualities of a 
perfect book on Summer Travel. It contains neither too much aor too little ; 
it is written in an easy, confidential style, without strain or affectation. As the 
writer sails along by coasts and lakes and rivers, and lingers in quaint Norwe- 
gian towns, he gives us here and there just sufficient scraps of history to awaken 
interest in this ancient and warlike but now peaceful and industrious people. 
He has the strong, bold touch of masculine force and observation, united to a 
graceful narrative style. The book from beginning to end reads like a story 
told by the Judge at the head of his own table. Carlyle sits in his den at Chel- 
sea, poring over 'Sagas' and ancient manuscripts; our stalwart traveler, 
accompanied by his ladies, mingles with the people, makes friends with the 
' Lapps,' watches salmon fishing in the pools, sleeps in Norwegian beds, and 
indulges in a little wholesome rhetoric over their narrowness and discomfort. 
His book is as fresh as the mountain breezes, while his observations are full of 
that kindly and appreciative feeling which can only come from a liberal mind 
and a generous heart." 

Marled, post-faid, on receipt of price by the publishers, 
JANSEN, McCLURG & CO., 

CHIC A GO. 



A New and Cheap Edition of 

MEMORIES: 

A Story of German Love. 

TRANSLATED FROM THE GERMAN 

By Geo. P. Upton. 

ibmo. Red edges: flexible covers; with new designs. Price, $i.oo. 

The great favor with which our HoHday Edition of this 
remarkable book was received, and the very large sale of the 
same, has induced us to issue an entirely new and beautiful 
edition at the low and popular price above named, with the 
hope that it may reach the hands of every lovor of pure and 
meritorious literature. 

From the New Tork Tribune: 

" The touching story of ' German Love,' whose tender pathos lacks only 
the harmonies of verse to make it one of the most exquisite poems in the Ger- 
man language, is here reproduced in an English costume of chaste and delicate 
beauty. 

From the Advance^ Chicago: 

" This is, in every respect, an exquisitely beautiful and charming book. * * 
The perfection of elegance and simplicity. The story itself is one of the purest, 
sweetest and most fascinating that we have read for months. * * A prose 
poem rather than a novel." 

From the Hotne Jojirnal: 

" The work is an admirable illustration of the richness, tenderness and depth 
of German sentiment, an endowment in which that people is distinguished from 
all others. Seldom has the dawn, the rise and the setting of the sun of passion 
been depicted with such sympathetic insight and such sweetness and refine- 
ment of color." 

From the Chicago Tribune: 

" This is one of the most charming little books we have ever read. W« 
know of only one other story to which we can compare it — the exquisite tale 
of Paul and Virginia, by Bernardin de Saint-Pierre. It were difficult indeed to 
say which of these two little books is the more admirable. They are both gems 
of love stories, and those who are acquainted with the French one can have no 
higher assurance of the excellence of the German than that it is not its inferior 
in interest or poetic elevation." 

" Memories" is also issued in Small Quarto, tmted paper, red 
border, gilt edge ; making it a beautiful gift. Price, $2.00. 

Sent by mail, post-paid, on receipt of price, by the publishers. 

JANSEN, McCLURG & CO., 

CHICA GO. 



POEMS 

OF THE 

FARM AND FIRESIDE, 

By EUGENE J. HALL, 

AUTHOR OF ''A WINTER'S NIGHT," ETC., ETC. 



One Volume, 8vo, with 33 Illustrations , - Frice, $1.75 
The same, JFull Gilt, ----- 2.25 



" In vigor and pathos they are certainly equal — we should &ay superior — to 
Carleton's Farm Ballads; in humor scarcely inferior to the Biglow Papers." — 
Interior. 

" The book will be widely read, and will kindle a kindlier sentiment and 
cheerier view of life about many a fireside. The Chicago publishers have 
issued it in sumptuous style, with numerous illustrations." — The Advance. 

" There is a nobility of mind even among the toilers of the land too often 
overlooked, and for this reason we like the flavor of these poems, because they 
smell of the field and forest, as well as portray the inner life of society at the 
fireside . ' ' — Pittsburgh Corn mercial. 

"A volume of short poems on familiar themes, wrought in fresh thought, 
and in a language whose graceful beauty is its simplicity. * * They are full 
of pathos, with a sprinkling of humor. It is not too much to say that some of 
them make the reader think that Carleton's double lives in Chicago."— C/zzV^^i? 
Post and Mail. 

" This is one of the books which we like to commend for its intrinsic merits, 
and for the pure, wholesome influence it will exert in the family, for it will 
' kindle a kindlier sentiment and a cheerier vein of life ' in every home where it 
finds a place. The publishers have issued it in splendid style, so that it makes 
a volume to be prized, for both its interior and exterior merits." — Journal of 
Education. 

" We find so much to admire in the author's fresh and vigorous style, his 
thorough knowledge of all that concerns the farmer and the fireside, his keen 
sense of feeling, and artistic idea of how to use it, that we have read his poems 
with genuine pleasure, and cordially recommend them to our readers. * * Mr. 
Hall possesses the power of touching the feeling of his readers without apparent 
effort. His poems express in many ways the wants and desires of the com- 
munity, and cannot fail to brighten an evening by the crackling logs, or to while 
away the hours when work is done." — Inter-Ocean. 

Mailed., post-paid., on receipt of price by the publishers. 

JANSEN, MeCLURG & CO., 

CHICAGO. 



TRUTHS FOR TO-DAY, 

BY PROF. DAVID SWING. 



A beautiful volume, containing a choice selection of the 
finest discourses of this eloquent preacher. i2mo,' tinted paper, 
325 pages. Price $1.50. 

From the Netv Tork Tribune: 

" The preacher makes no display of his rich resources, but you are con- 
vinced that you are listening to a man of earnest thought, of rare culture, and 
of genuine humanity. His forte is evidently not that of doctrinal discussion. 
He deals in no nice distinctions of creed. He has no taste for hair-splitting 
subtleties, but presents a broad and generous view of human duty, appealing to 
the highest instincts and the purest motives of a lofty manhood. In his view, 
the ethical element holds the rightful supremacy in our nature." 

From Dr. Powers in the Alliance^ Chicago: 

" As sacred compositions, they captivate by a sweetness that is as natural 
to them as tints to the rose or flavor to the strawberry. They are logical with- 
out a display of argumentation, and poetical without any sacrifice of directness 
and sincerity. While one's reason is appealed to all along, the language of the 
appeal comes up all blossoming and fragrant with the heart. It would be hard 
to find in the same compass so much real poetry and logic in vital union as in 
these discourses. And here is the secret of their power." 

From the Ifidependent, Nerv 2~ork: 

" So far are these sermons from being hostile to true Christianity that they 
constitute a most powerful defense of all that is powerful and permanent in our 
religion. * * The American pulpit has sent forth few volumes of sermons 
richer in thought, more devout in sentiment, more admirable in statement, 
or fairer in outward fashioning, than this volume of sermons of Mr. Swing." 

From the Advance, Chicago: 

" Such is the glow of his rhetoric, such the beauty of his illustrations, such 
the generous tone of his sentiments, that the reader is soon brought into admir- 
ing sympathy with the author." 

Sent by mail, post-paid, on receipt of price by the publishers. 

JANSEN, McCLURG & CO., 

CHICAGO. 



